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TRADING STRATEGIES ·
PATIENCE - If there is one thing you must learn, it's patience. Good things come to those who wait, be it low
buy prices or high sell prices. Sometimes if you had only waited, you could have sold higher or bought lower.
Have patience, it's without a doubt one of the golden keys to making money in the stock market.
REVERSE PSYCHOLOGY - If patience if the golden key to trading, then the silver key is doing things opposite
from the rest of the market. You want to buy when the average investor is selling and driving the price down. And
when wonderful news is driving a stocks price higher, you want to sell your shares at the over inflated price.
Buying when stocks are falling and selling when they are moving into higher ground is one of the hardest things to
learn [and do] when you first start trading. We don't have the luxury of holding our stocks for years to help iron
out the little highs and lows. We live off the little highs and lows. Buy when there is blood in the streets!
EMOTIONS - The stock market is very good at playing on your emotions. In order to be a good trader, you
must look at the market in a cold, hard way. When the masses are selling in a panic, you must stand fast or step up
and buy. Remember that the market is made up of emotional sheep buying and selling in waves - you must be the
cold, cunning and calculating wolf looking over the heard for your kill. Don't panic sell and don't buy on hysteria.
MARKET ORDERS - Don't use them unless you have to, and DON'T EVER place a market order for a stock at
the opening of the market, or when a stock is making new ground fast (such as during a positive mention on
CNBC). Putting in a market order in the first 10 minutes of the market is a sure way of paying the highest possible
price for your stock, because as all the built up orders from the previous day go through, it lifts the stock prices for
a few minutes. You can be pretty sure that you order will go off at the high of the day this way (but keep in mind
it's sometimes handy to sell during this time).
BUYING LOW - Sometimes the best way to buy low is to put in a limit order for a stock at "a price you'd love to
own the stock at". Let's assume for a moment that the stock you want is trading at 20 dollars, try putting in an
order at 18 1/2 and wait it out, what do you have to loose? You never know when you might hit the low for the
day that way. It's far better than putting your limit order at 19 7/8, only to find it crashed past that, filled your order
and continued down to 18 3/8. You'd be surprised what an effective way this can be to both buy and sell. When
you get your "dream" price, it's a great feeling.
SELLING - Selling is actually harder than buying in many ways. If you are trading a stock, then decide what price
you want to sell your stock at as soon as you buy it, so when that price does come along, you'll be ready to move.
Using a GTC order ( good till cancel) is also a good way to sell stocks once you own them, since many times a
stock will move up for just seconds - not even enough time to place your order. But if it's "on the books" when the
stock makes a quick run up, you'll be right there selling it.
IF YOU ARE WRONG - then you are wrong. Don't try to justify a bad trade by convincing yourself it will turn
into a good trade.. Talking yourself into believing that your mistakes are actually wise moves in disguise is very
costly. Be professional enough to spot your mistakes and move on - think of it as day trader insurance.
PROFITS AREN'T AS IMPORTANT - as your capital. If you miss out on some profits, that's okay, you can
always find another stock to buy. However, if you lose a big chunk of your trading money then the game is over.
Protecting your trading capital is your number one mission, followed, of course by increasing it.
DON'T GET GREEDY - Greed and fear drive the markets and for the most part drive the average investor to
making mistakes. Sell with good profits, but don't get too greedy. A savvy trader once said, "Pigs get fat, hogs get
slaughtered".
BIG SWINGS - Big moves up are sometimes followed by big moves down and visa versa. Sell on abnormally
large moves to the upside and buy on abnormally moves to the down side. They are generally out of character of
the stock and can many times be followed by a "snap back" on the stock. Knowing your stock's trading habits can
be very helpful.
HOT STOCKS - Stocks that are hot move great, but nothing lasts for ever. If you buy a stock for a big, quick
gain and find that the stock has "lost its heat", don't allow your money to be dead (unless you are looking for an
investment). Sell and move on, don't justify your mistakes - it tends to be a costly justification process in the long
run.
JUSTIFICATION IS COSTLY - Don't hold a losing stock to justify your original purchase. If you make an
incorrect buy or end up with a stock that is falling when you thought it would climb, handle those mistakes quickly
- do not be tolerant of stocks that are costing you time and money - get rid of them!
SUDDEN MOVES UP - Be very careful buying stocks that have just made sudden moves up. Many times they
are following very closely with sudden profit taking.
TIME TO BUY - One of the best times to buy is when a stock is going down on low volume (with no news) as
compared to recent increases on higher volume. This suggests that the selling is lighter and that the holders of the
stock that are going to sell have finished selling and the rest are holding. The sellers of the stocks then may come
back into the market when they see the price stabilize. It's also not a bad idea to sell on high volume on the way
up, as this usually creates abnormally high prices that cannot be maintained very long.
SIDELINES - Remember, you can't take advantage of market dips if you are already in the market. It's better to
be out of the market more for day trading than in the market. This will allow you to get in and out with profits fast
and be on the sidelines should dips occur. Try to be out of the market more with your trades and in the market
more with you investments (as long as they are good ones).
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