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Everyone related to Stock Market is always focused on the goal of how much they can make buying/selling a stock, they forget to concern themselves with how much they risk loosing. Is it true that “The secret to great wealth in the stock market, is not big gains; its small losses”
Is this a strategy of keeping losses small? If we will win only 1 out of 3 times with our losers loosing 5% and our winners gaining 25% we can make extremely large profits. That’s do the math assuming that there is only 1 out of 3 winners. So if we make 9 trades of USD10,000 each in one month it means we will loose money on 6 and make money only 3. the 6 losers will cost us USD3000 (6*5% loss on each of USD 10,000 Trades) and the 3 winners will net us USD7500 (3*25% gain on each of USD 10,000 Trades) for a profit of USD 4,500
What do you think which is the most important mistake in trading that we should avoid among these.
Trading with money you can't afford to lose
2. The need to be "certain" 3. Words that will kill you! HOPE---WISH---PRAY 4. Not Acting on your plan 5. Not knowing how to get out of a losing trade 6. Having an ego
7. Falling in love with a sector or script
1: Never before in history have we seen such explosive growth of the middle class worldwide. This means ***** new markets everywhere for everything.
2:History shows returns are much higher for a portfolio formed midway in a recession than one formed midway in a recovery.
3: Despite the market run up since March, takeovers are everywhere which means market pros are seeing good value in select companies.
4: Corporate bond yields are generous especially relative to treasuries
5: Dividends, which are responsible for half the long term return of the market, are very attractive in certain companies
One of the #1 "problem areas" that's getting between you and the
trading results you know you deserve is...
-How to, once and for all, TAME RISK.
We’ve been preaching this ever since we started training trader’s
way back in 2004, and it's something that, honestly, not a lot
of traders want to hear.
Why? Because they don't think it's "exciting", so they focus
purely on things like the next "trick" that will trade for them
while they sleep.
And this is why they fail.
But when you finally realize that the key to potential success
in ANY market is how to properly take control of risk and then
use it IN YOUR FAVOR...
-well, that’s when true trading success, is finally at hand for
many traders...
Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. The logic dictates that as the price declines towards support and gets cheaper, buyers become more inclined to buy and sellers become less inclined to sell. By the time the price reaches the support level, it is believed that demand will overcome supply and prevent the price from falling below support.
Support does not always hold and a break below support signals that the bears have won out over the bulls. A decline below support indicates a new willingness to sell and/or a lack of incentive to buy. Support breaks and new lows signal that sellers have reduced their expectations and are willing sell at even lower prices. In addition, buyers could not be coerced into buying until prices declined below support or below the previous low. Once s
What is Resistance?
Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further. The logic dictates that as the price advances towards resistance, sellers become more inclined to sell and buyers become less inclined to buy. By the time the price reaches the resistance level, it is believed that supply will overcome demand and prevent the price from rising above resistance.
Resistance does not always hold and a break above resistance signals that the bulls have won out over the bears. A break above resistance shows a new willingness to buy and/or a lack of incentive to sell. Resistance breaks and new highs indicate buyers have increased their expectations and are willing to buy at even higher prices. In addition, sellers could not be coerced into selling until prices rose above resistance or above the previous high. Once resistance is broken, another resistance level will have to be established at a higher level.
How to Calculate?
Pivot = (High Point + Low Point + Close Point) / 3 (example)Range = High Point - Low Point 3R [3rd Resistance] = 1R + Range2R [2nd Resistance] = Pivot + Range1R [1st Resistance] = Pivot + (Pivot - Low)H [Yesterday's High]P [Pivot Price, i.e. Midpoint]L [Yesterday's Low]1S [1st Support] = Pivot - (High-Pivot)2S [2nd Support] = Pivot - Range3S [3rd Support] = 1S – Range
Using pivot points as a trading strategy has been around for a long time. This was a nice simple way for traders to have some idea of where the market was heading during the course of the day with only a few simple calculations.
The pivot point is the level at which the market direction changes for the day. Using some simple arithmetic and the previous days high, low and close, a series of points are derived. These points can be critical support and resistance levels. The pivot level and levels calculated from that are collectively known as pivot levels.
Every day the market you are following has an open, high, low and a close for the day. This information basically contains all the data you need to calculate the pivot levels. The reason pivot points are so popular is that they are predictive as opposed to lagging. You use the information of the previous day to calculate potential turning points for the day you are about to trade (present day).
Because so many traders follow pivot points you will often find that the market reacts at these levels. This gives you an opportunity to trade.
If the market opens above the pivot point then the bias for the day is for long trades as long as price remains above the pivot point. If the market opens below the pivot point then the bias for the day is for short trades as long as the market remains below the pivot point.
The three most important pivot points are R1, S1 and the actual pivot point. The general idea behind trading pivot points is to look for a reversal or break of R1 or S1. By the time the market reaches R2,R3 or S2,S3 the market will already be overbought or oversold and these levels should be used for exits rather than entries.
A perfect set up would be for the market to open above the pivot level and then stall slightly at R1 then go on to R2. You would enter on a break of R1 with a target of R2 and if the market was really strong close half at R2 and target R3 with the remainder of your position.
At the beginning of the day we were below the pivot point, so our bias is for short trades. A channel formed so you would be looking for a break out of the channel, preferably to the downside. In this type of trade you would have your sell entry order just below the lower channel line with a stop order just above the upper channel line and a target of S1. The problem on this day was that, S1 was very close to the breakout level and there was just not enough meat in the trade. This can be a good entry technique for you. Just because it was not suitable this day, does not mean it will not be suitable the next day. The Pullback Trade
This is one of our favorite set ups. The market passes through S1 and then pulls back. An entry order is placed below support, which in this case was the most recent low before the pullback. A stop is then placed above the pullback (the most recent high - peak) and a target set for S2. The problem again, on this day was that the target of S2 was to close, and the market never took out the previous support, which tells us that the market sentiment is beginning to change. Advanced
As we mentioned earlier, there are lots of ways to trade with pivot points. A more advanced method is to use the cross of two moving averages as a confirmation of a breakout. You can even use combinations of indicators to help you make a decision. It might be the cross of two averages and also MACD must be in buy mode. In the example below the market passed through S1 and then retraced to the S1 line again. It then formed a channel. At around this time we had a cross of the averages, MACD signaled buy and there was a breakout of the channel line. This gave a great signal to go long with a target of the original pivot line. Mess around with a few of your favorite indicators to help determine an entry around a pivot level but remember the signal is a break of a level and the indicators are just confirmation.
Best Regards
Mark.
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