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A Few Random Thoughts About Trading (Weekend Newsletter)
Sat, December 12, 2009 11:10:48 AMFrom: MarketFN.com <Members@MarketFN2.com>Add to Contacts
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The Week At A Glance According To The Charts
A Few Random Thoughts About Trading
A Few Random Thoughts About Trading -- by Bill Kraft
Copyright 2009, Makin' Hay, Inc., All Rights Reserved
Bill Kraft
Editor
At times, it is a struggle to come up with a new and specific subject for an article every week. As I was thinking about what I should write this weekend, it occurred to me that trading is a part of life and in life we see ourselves do many things without a conscious intention.
Supermarkets are great examples that use our natural tendencies to add to their sales. As we go to a check-out, look around at all the last minute things we can buy just by reaching out a hand. Tabloids with enticing headlines abound. Have you ever been tempted to read that article about the boy who was abducted by aliens only to return with an astonishingly high IQ or the article about the celebrity who is having affairs around the world. Even if that doesn't get us to buy, there are many who pick up the paper just to glance at the tantalizing article. So, too, are there tempting bars of candy and the all so necessary breath mint.
As we know, these displays set us up for the "impulse" buy. We may not need it, but the suggestion may lead us to buy it. Have you ever noticed that in your trading or investing? A friend or a broker might suggest a stock, for example, and we just buy it. We do no fundamental analysis and certainly may fail to look at a chart to see whether there is an opportune entry or, probably even more importantly, whether there is a handy exit. While an impulse buy of a candy bar may not be terribly devastating, an impulse buy of stock might be.
Just like at the supermarket, if we think about things and do even a little analysis, we may pass on the stock as we would on the tabloid. We might see that the stock price is pretty far from a logical exit or that the reward to risk potential may not be what we ordinarily plan.
Generally, the wiser supermarket shopper makes a list and doesn't go shopping on an empty stomach. They have a plan and the plan has eliminated much of the impulse buying since a growling stomach isn't suggesting additions to the cart and the list has set pre-determined choices based upon the shoppers needs.
Perhaps the trader would be wise to follow some of those cues. Having a plan in the first place would help eliminate candidates that fail to meet the trader's requirements. As an example, a trader who is interested in entering a bullish trade might demand that any potential entry be above the 50 day moving average and he might discipline himself to understand that he need not be invested in bullish positions when a market is decidedly bearish. I've found that most of my selection process with stock and options is one of elimination rather than selection and only when I no longer find a reason to eliminate am I ready to add to the portfolio.
I hope you have a wonderful weekend.
You can comment on this article on my blog!
Good Trading!
Bill Kraft
Editor of $10 Trader, Option Trader and Trend Trader
"Trade Your Way to Wealth" by Bill Kraft is an Amazon.com best seller!
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Mr. Kraft's past articles are posted on our website for your review.
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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. With that opportunity comes additional risk so we try to watch trendlines and support levels in an attempt to minimize any losses.
Chart by StockCharts.com
CDR (Cedar Shopping Centers, Inc.)
Company Profile
CDR is another stock near the top of the range initially established in late October. It might be attractive on a move above $6.15 particularly when we consider that it has been paying dividends around the 7% mark.
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OPTION TRADER -- by Bill Kraft
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Chart by StockCharts.com
FDP (Fresh Del Monte Produce, Inc.)
Company Profile
This one has just formed a double bottom and may be ripe for a bullish move. I'm considering the possibility of selling some Jan 20 naked puts for around 40 cents.
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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
PGR (Progressive Corp.)
Company Profile
Worth watching as it is now at the top of a channel with rising MACD. It's anybody's guess whether the resistance will hold or we'll see a true breakout. While the best guess may be a retracement within the channel, this one could be ready to move.
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Chart by StockCharts.com
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Company Profile
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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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