If you stick to the basics, looking for good companies at support or resistance, that the odds of the trade working are so much better. However, a stock testing resistance and not being able to break through it seems like such an incredible play in uncertain times like today's market. Even if the market goes up, this stock already did. So when it doubt, looking for stocks that really have a chance of falling is always a good choice when selecting a play.
It is simple to learn how the downside works, whether you decide to sell stock short, buy puts, or write covered calls. Once you have learned the upside plays, learning the downside will only take about 10% of the effort to learn because you already know so much. The sad thing is that most people are missing the best money in the stock market if they are not playing the downside. Falling stocks mean FAST PROFITS! Who could ask for anything more?
A big secret to playing a trade, when you are not quite sure of the market direction, is to set alarms (bracket trade). I set alarms in my REAL TIME MARKETS that go to my cell phone and my computer. These alarms are real time and come to me instantly, which is critical. It takes my broker a few minutes to call me when I set them with him. The alarms allow me to follow my plan, and not have to worry in between. The alarms also give me TIME FREEDOM and I don't have to watch real time charts, which most of the time get you out at the wrong times. If you set the alarms, make sure you have one set to get you out immediately if a trade goes against you, but you can check first to see if the stock is just kissing good-bye a price and heading the right direction before you get out. You can find REAL TIME MARKETS on my home page. Just one trade will be worth the fee for the whole year!
Looking at the statistics that may give us some direction of what the market is possibly going to do is the Put-Call ratio, the VIX Index and the Commercial Traders.
1. As of last week the Commercial Traders increased their shorts from 4.8% to 5.2%. This means they were 4.8% more short than long in the now they increased their shorts another .4% from the week before indicating a bottom is not yet formed in the market. 2. The put call ratio has tested the high of a soft resistance but has a lot more to go to test the lows we saw this last two years. This is a second confirmation that the bottom is not yet hit. 3. The VIX index is the same situation, it tapped almost 40 - a soft resistance, but a market close price of 50 is a more serious number that called that last two market bottoms. This makes a third confirmation of a bottom not being reached in this last pullback.
Based on these we might consolidate and head up some, but it seems like we have some bearish movement due us to get to a serious bottom still.
In my LEAPS class I teach you some bearish trading - as a matter of fact, I teach you when you write covered calls how you can make money twice when you are falling versus just once - along with how to insure a stock or an entire portfolio. Would it be wonderful to trade with peace of mind in any market? You bet it would.
Darlene Nelson with BetterTrades
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