Sector Rotation Strategy can help you view the larger picture on money flows in the market and possibilities of where strong sectors will emerge. Regarding sector rotation, probably the best book I read on the issue, which helped me determine my strategy, is Peter Navarro’s “If it’s Raining in Brazil, Buy Starbucks.†Navarro introduces the…
I wanted to point to a recent, clear example of the “Impulse Buy” trade I’ve been referencing. The chart ends March 23: A few highlights: Note the consolidation (base) preceding the move The new momentum high drives price sharply up as news broke (Chrysler may be a take-over candidate) New traders entered after the news…
By analyzing fundamental components of the economy and business cycles, you can gain an edge using technical analysis signals. But what happens when fundamental signals (or anticipated releases) thwart an otherwise good technical setup? When I first started trading, I wanted as many signals to be in line with my analysis as possible, and as…
Once you understand how mental accounting errors can hurt trading results, it is helpful to identify patterns in your own thinking and trading which can be challenged with personal strategies. While a blog entry cannot attempt to identify and correct these errors, I can challenge you to identify your own thoughts and seek out further…
Quick: What if I gave you $1,000 to invest however you wanted right now? It’s your money now – free. Would you put it on a speculative option play and try to double it within a week? Now, ask yourself, would you be likely to make the same speculative decision if forced to use your…
While there are various ways to increase your potential for profit in the market, I am submitting five categories to begin altering your trading behavior to increase potential profits. Hold your trades longer than usual Increase position size (concentrate capital) in fewer stocks Decrease position size but trade highly volatile stocks (those with high beta,…
Is it possible that market success can be achieved by going against common knowledge and popular ‘rules’ in the market? We accept as a fact (whether true or not) that 80% or more traders fail after their first six months or year of dedicated trading. Many people attribute this to emotional failure or a variety…
Momentum can also be a leading indicator when divergences between price and momentum arise and can lead to some profitable, high probability trades. Please understand that the set-ups I am about to discuss are countertrend tactics, and as such, you must employ a hard stop in the event that the trend reasserts itself and you…
While thousands of posts and articles have been written on why traders are not achieving the success they desire (or worse, are failing), I wanted to point out three quick ideas that summarize behaviors that lead to failure in the market by newer traders. Traders play for large targets and “swing for the fences” and…
When you enter a trade, you expect prices to move in your favor and gain profit from your temporary assumption of risk. The outcome is not always profit, however, and losses can be very frustrating in the market. Even though human nature primes us to put more emphasis on current events (and outcomes), trading success…