You cannot expect to watch television or drink beer every evening and find the answers to something as complex as the stock market.
– William O’Neil
On October 17, 2009, In Thought of the Day, by ElfLord
On October 16, 2009, In Book Reviews, by ElfLord
One of the best books on trading techniques that I have ever read. It is based on stage analysis, that is, looking at charts to determine whether a stock is going up, topping, declining, or bottoming out. The author stresses using stage analysis not only on individual stocks, but also on industry sectors as well as indexes like the Dow and Nasdaq.
The philosophy is based on the view that nearly all stocks experience four price stages: accumulation (stage 1), uptrending (stage 2), top area (stage 3), and downtrending (stage 4). Therefore, an investor, has a high probability of success if he or she enters the cycle just before the stock moves to stage 2. Then he explains how to select a stock by simply studying its price/volume chart and how to time your entry. (more…)
On October 16, 2009, In Thought of the Day, by ElfLord
Of course there is always a reason for fluctuations, but what the tape does not concern itself with the why and wherefore. It doesn’t go into explanations. The reason for what a certain stock does today may not be known for two or three days, or weeks, or months. But what the dickens does that matter? Your business with the tape is now – not tomorrow. The reason can wait. But you must act instantly or be left.
– Jesse Livermore, Reminiscences of a Stock Operator
On October 15, 2009, In Thought of the Day, by ElfLord
Any person who tries to be in the market at all times is almost certain to lose money, for there are many periods when even the most skillful trader is in doubt as to what will happen. A wise man lets the market alone when the averages disagree.
– Robert Rhea, The Story of the Averages
On October 14, 2009, In Thought of the Day, by ElfLord
It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.
– George Soros
On October 14, 2009, In Good Articles, by ElfLord
IF YOU THINK knowing when to get into a stock is tough, try deciding when to get out. While we ideally want to stay with a position for as long as possible, there’s no federal law that says you must hold Intel (INTC) until your dying day. A trader is just like a trapeze artist, who, while swinging high above the circus crowd, must master not only grabbing onto the next bar, but letting go of the one that came before it.
When it comes time to prune your portfolio, the first stocks you should consider selling are your losers. There are the obvious tax advantages of doing so. But even more important is the likelihood that losing stocks will stay losing stocks. Very seldom does one of my holdings come back from the grave.
But what about selling your winners? You might have some. Although the major averages are under water year-to-date, there are actually plenty of stocks that are doing quite well.
So if you are fortunate enough to be sitting on some winners these days, how do you know when it’s time to take the money and run, as Steve Miller puts it? What is the smartest way to turn a paper profit into the real thing? (more…)
On October 13, 2009, In Thought of the Day, by ElfLord
The Alligator Principle is based on the way an alligator eats: the more the victim tries to struggle, the more the alligator gets. Imagine an alligator has you by the leg; it clamps your leg in its mouth and waits while you struggle. If you put one of your arms in the vicinity of its mouth while fighting to get your leg free, it lunges and then has your arm and leg in its clutches. The more you struggle, the more the alligator takes you in.
So if an alligator ever gets you by the leg, remember that your only chance is to sacrifice the leg and drag yourself away. Translated to market terms, the principle is when you know you are wrong, close your position! Don’t rationalize, hope, pray, or anything else, just get out. Don’t change your position, hedge it, or anything else; just take the loss and get out!
– Victor Sperandeo