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Weekend Newsletter for March 24, 2007 Please forward to a friend! (Subscribe)
The Week At A Glance According To The Charts
Reasons to Trade
Reasons to Trade -- by Bill Kraft
Copyright 2007, Makin' Hay, Inc., All Rights Reserved
Bill Kraft
Editor
I have been re-reading Dr. Alexander Elder's "Come Into My Trading Room" (New York: John Wiley & Sons, Inc., 2002). It, like his other books, is excellent and informative and is written from the perspective of a psychiatrist/trader who has been successful in the markets. I have mentioned Dr. Elder and his books before because they give a different slant from many of the trading works on the market. One of the critical elements of trading he addresses is the psychological. Many of us have heard and mouthed the rubric that the markets move on fear and greed, but few of us have taken the time to understand how those emotions really work in moving stock prices. "Come Into My Trading Room" truly adds to that knowledge.
I am convinced that the psychological is the single most important element in successful trading. I consider myself to be primarily a technical trader who is also aware of fundamentals. Technicals (charts), as Dr. Elder points out, are a visual depiction of the emotions of the markets; the struggles between the bulls and the bears and between fear and greed. They are, to my mind, like a TV screen painted with ongoing emotion from which we can make trading decisions.
The point of this article, however, is meant to strike a somewhat different chord. Again, Dr. Elder's work led me to the realization that people trade for different reasons. It seems obvious that we trade to make money, but that may not be the real motivating factor for many. There can certainly be a "rush" from making trades. Some traders, it seems, trade just to trade. That group is caught up in gambling mode and, for them, it seems critically important to trade and trade again without real regard to real liklihood of success. I once had a student who zealously paper traded and with great success in a down trending market. He then began to trade with real money just as the market turned choppy. In spite of the market conditions he continued to make trade after trade even though only few were successful. I asked him why he was doing that and he said he had to have his money working all the time. I suggested that was nonsense especially if he was losing.
Clearly, there are times to enter bullish trades, times to enter bearish trades, and times to go play golf or go fishing or do something other than trade. If we do not recognize and believe that there are times not to trade, our successes will at least be seriously undermined by our losses if not completely outpaced by them.
Though we emphasize that our alert services are educational and do not offer individual financial advice, I see that free trial subscribers often leave in a day or two after signing up if they see no trades. I suspect these folks are the gamblers. They seek action and they want it now! Perhaps if they really wanted to add to their trading knowledge, they would look inwardly and see why they were so dissatisfied in a day or two when no alerts were received. They might see that there were reasons not to trade. The markets might be in flux; there might be upcoming news about a fed decision that undoubtedly would move the market in a direction as yet unknown. Inaction as well as action in the market can be important. I am trading with my own real money and I am not going to put it at risk if I don't think I have some kind of edge. I won't make trades in my own account unless there is some information, usually technical, that results in a belief that I have a decent entry. Of course, even then, I am wrong at times. Consider how often I might be wrong if I traded just for the sake of being in a trade.
It has been said that the really successful advisory services are the ones that put out lots and lots of trades. Successful for whom? The advisory service. If a multitude of trades are sent out, there is constant activity and that appeals to the gambler. Unfortunately so many are, indeed, gamblers looking for the one big hit. Obviously that phenomenon accounts for the successess in Vegas and Atlantic City. Again, though, the question is successes for whom? The answer, of course is the casino owners not the vast majority of gamblers who visit seeking action.
Good Trading!
Bill Kraft
Mr. Kraft's past articles are posted on our website for your review.
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* * * SCOTTRADE * * *
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SUCCESS TRADING GROUP -- by the Success Trading Group Team
Our Success Trading service delivers quality trading ideas for the elite investor that has the financial wherewithal and market nimbleness to profit on small moves in a stock's price. Become a member and you will be provided with email and/or pager alerts intended to provide you with the opportunity to make many, many profitable trades.
Chart by StockCharts.com
HD (Home Depot, Inc.)
Company Profile
Last weekend in this note we stated that "our Success Trading Group has limited its trading significantly since the middle of February and hope to get to more active trading in the near future." Well, we were able to close another winning trade this week by trading in and out of Home Depot in a quick 1 day trade.
Our Success Trading Group has closed over 300 winning trades and only 8 losing trades on our Main Trade Table.
Details Here.
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OPTION TRADER -- by Bill Kraft
Our Option Trading Service is for conservative traders that understand leverage principles. We focus on powerful option trading strategies that place volatility and momentum in your favor. And we pride ourselves on minimizing our losses. We always know our downside potential in a trade.
Chart by StockCharts.com
SIMO (Silicon Motion Technology Corp.)
Company Profile
It looks as though SIMO may present a call buying opportunity if it retreats to the 10 day or even 40 day moving average and then bounces up. I'll need to be careful to assure enough open interest when looking for the right calls to buy.
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TREND TRADER -- by Bill Kraft
Trend trading as we try to practice it is a form of momentum trading. We prefer to try to capture profit out of the middle of the trend rather than try to catch reversal at bottoms and tops.
Chart by StockCharts.com
QCOM (Qualcomm Inc.)
Company Profile
I made $2.80 a share in a nice 11 day trade after an entry on March 8 and an exit on the 19th of March.
Try our Trend Trader Real-Time Alert Service!
Details Here.
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$10 TRADER -- by Bill Kraft
We really enjoy trading stocks that are $10 and under. Often they provide the chance to enjoy high percentage gains and, of course, at worst, the risk is limited to what we paid for the stock.
Chart by StockCharts.com
DITC (Ditech Networks, Inc.)
Company Profile
Though the time is not yet, it looks as though DITC may present a very good bullish entry with a convenient downside exit in the near future.
Try our $10 Trader Real-Time Alert Service!
Details Here.
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DIVIDEND INVESTOR -- by the Dividend Investor Team
Perfect for your IRA! Our Dividend Investor service focuses solely on the "best of the best" dividend paying stocks. Many of the stocks that we will be buying in our Dividend Investor service raise their dividends almost every year. Year after year! This is powerful. We buy these stocks for their powerful dividend producing income; and we will also buy these with a purpose to make capital gains as the stock increases in value.
Feel free to sign-up for a free 30-day trial. During such time you can review our Trade Table and see the type of stocks we are buying. You will also receive all the new investing alerts we send during your trial period. Again, many of the stocks that we will be buying in our Dividend Investor service raise their dividends almost every year. Year after year! This is powerful. Don't miss out on this service!
While we titled this service an "investor" service, we also believe these stocks are solid for the "trader" in you. With these stocks, we believe an exit point of 3% above the buy price is generally appropriate for traders. And, in fact, our first 17 positions have hit our 3% target subsequent to the buy alert!
Details Here.
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COVERED CALL SERVICE -- by the Covered Call Team
Chart by StockCharts.com
TLB - Talbots, Inc. is currently trading at $25.16. The May $25 Calls (TLBEE) are trading at $1.30. That provides a return of about 5% if TLB is above $25 on expiration Friday in May.
Company Profile
Learn more about our
8 Covered Call Tables!
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* * * SCOTTRADE * * *
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Trend Trader "The Trend Is Your Friend". Utilize trends and momentum in your stock trading!
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Covered Calls Conservative option writing -- Allowed in your IRA!
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The foregoing is commentary for informational purposes only. All statements and expressions are the opinions of Online Investment Services, LP. or the associated editor. This information is not meant to be a solicitation or recommendation to buy, sell, or hold securities. Past results do not guarantee future performance. Stock investing is risky. Option trading is risky. Futures trading entails great risk where one can lose more than his account balance. We are not licensed or registered in the securities or futures industries. The information presented herein and on the related web sites is presented "as is" without warranty of any kind either express or implied. Although the information has been obtained or derived from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolios of writers for this issue may, in some instances, include securities mentioned herein and on the related web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors. No one associated herewith receives compensation in any manner from any of the companies that are discussed in this newsletter or on the related websites. By accepting emails, including various paid subscriptions and free email reports and newsletters, you agree to the terms of the MarketFN.com's website Disclaimer, Privacy Policy and Terms of Use provisions as such may be amended from time to time.
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