This strategy has potential for double-digit returns with a large built-in hedge. Current market conditions have set up a unique opportunity to build a conservative portfolio that will profit even if the market falls by a certain percent, stays flat, or eventually rises over the remainder of the year. It goes without saying we have witnessed the most violent and dramatic market moves of the last 75 years of late. After falling a whopping 38.5% in 2008, the Standard & Poor’s 500 is already down another 21% in the first eight weeks of 2009. How does a traditional investor defend himself against this kind of market volatility and still have a chance of making money?
For investors or traders to make important money-risking decisions, they must possess the ability to focus on the important tasks at hand. To focus, you must have a quiet place where only you, your rules, and the execution of an opportunity exist. This formula sounds simple. But, in the Twenty-First Century, we live with myriad distractions that enter our lives on a second-by-second basis. Distractions arrive through our mailboxes, over our televisions, by way of our cellular telephones and, of course, “You’ve got mail.” With this chaos surrounding us, it can feel miraculous when we do make intelligent, profitable decisions. For most investor/traders, the problem of distractions is even worse when you are working from home than if you are investing and trading from an out-of-the-home office. That is the reason I have listed the five most common distractions and strategies for handling them.
After the huge losses in the recent past, many investors are asking themselves whether there are possibilities of participating on the stock and futures exchanges with reduced risk. In the following method, I will show a trading strategy which will work for everyone who is willing to invest the time and has the skill and patience to execute the trading strategy described here. In the following method, I will show a trading strategy which will work for everyone who is willing to invest the time and has the skill and patience to execute the trading strategy described here.
For those who are unfamiliar with the expression, a Key Level is merely a profound level of resistance or support. They are the points at which the very best trading opportunities are to be found. Specifically, they are the levels at which reversal and continuation scenarios unfold. For successful traders the world over, Key Levels are the holy grail. The vast majority of successful traders have techniques and approaches that revolve around Key Levels. The reason is simple. Key Levels enable the implementation of a sound risk management strategy.
Failing to control risk is the greatest hazard known to a trader. Those who fail in this endeavour do crash and burn eventually. There are many risk management techniques held out as credible, but the only one that I have found to be effective, is the one that utilises Key Levels.
MoonTides are electrical waves set up in the earth’s electric field by the Moon, and to a lesser extent, the other planets. These waves are felt by traders as electrical currents, and trigger emotional buying and selling. Thus they are very useful for timing day trades. They apply to all markets, but are extremely useful in the S&P 500. This chart shows 2 days of the S&P, with MoonTides. The first thing to notice is that there are 2 MoonTides, a positive one shown in green (+Tide), and a negative one, shown in red (-Tide). When the energy from a Moon/planetary event hits the earth’s ionosphere, it sends two waves around the earth, one in each direction. As these waves meet at any point, they are of opposite polarity, hence the two waves.
These waves create electrical currents that are unconciously felt by traders as emotional swings. Markets are provably about 60 per cent fundamental, and 40 percent emotional. The emotional component is very clear in daytrading. So knowing when the emotional swings are likely to change gives you a trading edge.
In this article let’s explore how “Trading The ‘Truths’ Of The Market” can actually improve our trading while at the same time simplify our trading. Here is a list of five major “TRUTHS” of the market:
- We cannot predict the markets!
- To be a successful trader we must trade the current market as it is happening and not rely on opinions, theories, or fantasies about what WILL happen.
- The market will tell us exactly how to trade if we know how to listen to what it is telling us.
- Money management is essential. But more important is how to develop the right money management system.
- Developing “The Trader’s Mindset” is a prerequisite for trading any approach or system successfully.
Millions of Americans work for good stable companies. So we think! Yet consider the twenty thousand plus employees that worked at Enron. September 2001, the atmosphere in the Enron offices was not any different than what it had been for the previous five years, robust and vibrant. People were proud to work there. The management policies made the daily business environment a place people looked forward to everyday. Everything was great, and there were no problems whatsoever.
The majority of Wallstreet analysts were recommending the stock. Top management was painting a rosy picture for the company’s future. New projects were being introduced. Money was flowing. The future looked great. Enron employees, like millions of other corporate employees around the world were immersed in the day-to-day activities of the corporation. How could they ever have known there was any trouble?
In Jan. of 2000, the Dynamic Trading method of analysis and forecasting projected the S&P would make a final bull market top by March 2000 which would be followed by at least a three year bear market and the S&P price would be cut in half before the bear market was over. That is not an after-the-fact forecast but one that was specifically included in the Dynamic Trader Report in early 2000. The final top was made in March 2000 as projected. As of the date of this article, Feb. 2002, the S&P is well on the way to fulfilling the second part of the forecast for a continued bear trend to well below the Sept. 2001 low.
Let’s look at the current position of the S&P and see why the evidence is over-whelming for a continued bear trend. Chart A below is monthly S&P data from the Aug. 1982 low through early Feb. 2002. The bull trend from the Aug. 1982 low completed a textbook Elliott five-wave impulse trend where each of the interior impulse waves clearly subdivided into five-waves of lesser degree.
Has the failure rate of chart patterns increased in recent years? In the last several years, have you found it more difficult to make money in the stock market? Do you get the feeling that indicators are less effective than they used to be in spotting profitable opportunities? I decided to find the answers to those questions with a new study. I spent a week updating a database of chart patterns that I used during research for writing my books, and found an alarming result.
In my investigation, I used 13,932 chart patterns spread over the years from 1991 to 2008. I did not use all of the chart pattern types in my analysis but concentrated on 23 of the most common and popular. They are: diamond tops and bottoms; double tops and bottoms (eight types of Adam and Eve combinations); triple tops and bottoms; rising and falling wedges; head & shoulders tops and bottoms (four types of simple and complex); ascending, descending, and symmetrical triangles; and rectangle tops and bottoms.
When creating a trading plan, you have to take into account all the possible contingencies. Here are the steps you should go through when designing your game plan. A trading plan is your carefully thoughtout and tested way of approaching and beating the market over the long term. It is the course of action for entering, exiting, and managing your trades so that all contingencies are considered before a trade ever takes place. With such a plan, emotions are left out of the trading equation, and only tangible criteria are used to make trades. Emotions can cause many problems in trading, including entering trades out of boredom, entering trades too early or not at all because of anxiety, staying in trades after profits should have been taken due to an emotional attachment to a tradable, or exiting too early and for a minuscule profit when it should have been left open longer.