Do you work for your money or does it work for you?

When you learn the Secrets to the stock market your money works for you.  You don?t have to wake up everyday at 7 am, commute to an office and make someone else rich.

Trading turns 100’s into thousands and for the truly dedicated and disciplined, thousands into millions. Notice I didn’t mention anything about intelligence. If it were only based on intelligence then every lawyer, doctor, scientist etc… would be making millions in the market. Conversely, they are often the least successful. Why? They have too big egos and they lack self control. Sure they can study for years in a row but when they are down $8,000 they can’t cut their losses, admit defeat and look for a better trade.

Most people got hurt in the global financial meltdown. ?Most? is the key word. Experienced traders didn’t. It takes years of trial and error to figure out the market.  Once you know what to look for, you too will see all the signs that told them they better sell everything and go short (meaning place trades that profit from a stock or the market’s decline).

Read more if you want to become one of the Haves instead of the Have Nots.

1.   Stock Market Secret Trailing Stop ? The Golden Lifesaver

A Trailing Stop is a Stop-Loss Order at a percentage or dollar amount below the market price for a long position.  It locks in profits and saves your financial life if the market turns against you. The trailing stop price is adjusted as the price fluctuates.  If the stock price doubles your trailing stop will sell once the price falls back a dollar of percentage from the new high.

If you had a 10% trailing stop and your stock went from $50 to 70$ and then fell the trailing stop would sell your shares at 4^3 ($70 -  ($70 x.1)  = $63. If you had a dollar based trailing stop of  $6 and the stock hit $70 and retreated it would sell at $64 ( $70 ? $6)= $64.

Percentage Trailing Stop Long & Short Position

Dollar Trailing Stop Short Position

2.    Stock Market Secret  -  Know When To Fold Em?

?Know when to hold em, know when to fold em? Kenny Rodgers.

1. Sell if your stock is down more than 7% from your purchase price. Don’t hope it will go back up. It may drop 40%. The Nasdaq is down over 72% from its 2000 high. That’s ten years later.

2. Sell if the stock violates the trading pattern’s anticipated behavior. If you bought a stock on a breakout and it sinks more then 3% below the breakout price. Sell it.

3. Sell if there is a lawsuit or management disputes or high level employees quitting.

4. Sell if earnings start to slow down.

5. Sell if the stock is way too extended. Meaning its valuation, which is simply the stock price relative to earnings is completely unrealistic. That means it is probably day traders playing with the stock and pushing up the price.

6. Sell if the stock is not going up but the rest of the market is.

3.     Stock Market Secret – Don?t Diversify

This is one of the most common mistakes that investors and traders do.  Everyone says diversify buyt all you do is offset your winners with losers.  Have different trades in your portfolio with different risk levels but don?t be everywhere buying utility stocks, high tech, emerging markets etc? Find a few select trades that fit you plan and go in hard.

4.       Stock Market Secret – ?Short the Turn Not the Trend?

Shorting the trend refers to trying to predict when a stock or the market has finished its upward climb. It means actually shorting the market or stock when it reaches a new high. The trader is making a huge gamble that the market will turn and sell off.

Let the stock or the market peak and begin its turn downward. Yes, you may miss 10% of the move but you probably eliminated 90% of unnecessary risk. Always shoot for the middle 80%. Think of a stock’s rise like a roller coaster. Buy after it begins its ascent and sell after it begins its descent. Short the turn.

5.    Stock Market Secret -?Plan Your Trade & Trade Your Plan?

Every successful trader has created a trading plan and stick to it.  They are emotionless traders because their plan tells them exactly what to do. Excitement (and fear of missing an opportunity) entice weak traders to enter the trade before they should. We get euphoric highs coming off of a very profitable trade and we seek to recreate that feeling when no stocks present a viable setup..

By combining patience, discipline and a well researched and devised trading plan it becomes mechanical  and we wait for the right market conditions to present themselves before we go into a trade.

6.     Stock Market Secret ? ?The Trend is Your Friend?

The trend is your friend. Yes most traders know that and love saying it but most often overlook analyzing the trend on many different time frames. Look at the trend of the stock on the 5min,15 min,1/2 hr, hourly, daily, weekly? Knowing what is happening on all time frames gives you the edge most overlook.  Stocks tend to continue moving in the same direction.  80% of stock move in the same direction of the general market.  You should always trade with the general markets.

7.     Stock Market Secret ?Preservation of Capital

?How much can I loose on this trade?  is what  the pros ask themselves before they enter every single trade.  They Calculate how much they can , but the downside is most important as when the moneys gone so are you.  Preservation of capital is the single most important aspect of any trading or investment strategy.’

8.     Stock Market Secret – ?Don?t Always Be In The Market?

There are times when it is best to stay out of the market and watch from the sidelines.  There are not always great trades waiting for us.  Many traders say they make most of their money (homeruns and grand slams) a handful of days out of the year and make little singles here and there the rest of the time.  If  your trading plan doesn?t come up with high reward opportunities turn off the computer and take a day off.  Don?t try to force the market.  You will undoubtedly loose.

9.     Stock Market Secret -  Risk to Reward Ratios

For every trade calculate the ratio of the potential gain verses the potential loss. If you have a trailing stop of 10% that means you are willing to loose 10% on that trade.  In order to be able to justify placing that trade you must expect an upside of at least 20% (2 to 1 risk /reward) if not 30% (3 to 1 risk /reward).  Don?t ever place a trade without at least  a reward/risk ratio of at least 2 to 1.

10.     Stock Market Secret- Don?t Ever ?Chase a Stock?

?Chasing a stock? ? is when you target a stock you believe will go up but you miss your buy point at $50.  It is rising rapidly and you keep trying to get your order filled.  It is now $51 then $52 and you trying to buy it. Let it go, chasing means you are going to buy at a price higher then where you wanted (possibly at  the peak) which often leads to buying right before it comes back down.

11.     Stock Market Secret- Never ?Average Down?

Never buy into the nonsense of it?s a better value or it?s a bargain.   If a stock if $50and drops to $45 stock  some load up more shares.  Because,  they will get a cheaper average price when in reality they get more of a stock less people want.   The secret is to Average Up.  More people want to own the stock the price rises.  That is what you want to see in a trade/investment.

This is what can happen to you when you average down.  $112 to $8 in one year.

12.     Stock Market Secret -  By on Strength, Sell on Weakness

?Buy high, Sell higher.?

JDSU -  $232 to $1250 in 5 months

I have never been a fan of buying on weakness and selling on strength. If a stock is strongly trending upward I will buy on the dips, which is when short-term investors take profits and the stock retreats from 2% to 6%. That is usually not weakness, that is simply profit-taking. If a stock has been on a long run upward in price, eventually, the trend will have a moderate to significant pullback.

If the stock makes a very drastic increase in price in a short period of time, then selling into strength makes sense. There is an expression called ?going parabolic?, which means a stock for example goes from $40 to $140 in two months, which is usually unsustainable and the stock will suffer a large correction. Selling portions of your holdings in that stock as it dramatically ascends to preserve your profit is wise. It is better to sell too soon than sell too late.

13.     Stock Market Secret – ?Scared Money Never Wins?

Only EMOTIONLESS TRADERS make millions.  Only trade with money you can safely loose.  If you are trading your rent money ? you might as well kiss it goodbye.  How can you be detached when you are so desperate for the trade to succeed and will be devastated if it fails.You will never make smart trades.   The best traders are emotionally detached.  They never get crazy over short-term wins or losses. If you stare at charts for hours it is a sign that you don?t have a trading plan in place or the discipline to act on it or are unsure of your plan?s strategy.  They only concentrate on the technical aspects of their trading plan rather than on the money they are making. If you trade detached according to a well thought out trading plan the profits will follow.  Be emotionally detached from the market.

14.     Stock Market Secret ? ?Don?t Over Trade?

You actually trade/invest too often. You want to trade all the time. You want action. You are not patient waiting for those ALMOST certain trading/investing opportunities where big profits will be GIVEN to you.  You are drawn into short-term gambling methods or even highly stressful day trading techniques. Not realizing the big money is in the big moves. Be patient and the money flows in.

15.     Stock Market Secret – ?Get Rich Quick = Get Poor Quick?

Forget Get Rich Quick (that is a gambler mentality)- If you feel that way you will Go Broke Quick- Trading is like becoming a doctor- one must study, learn, practice and refine their skills and disciple.

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