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Dan's Trading Tips
Note: If you are new to trading or investing, I suggest reading these rules many times over until they
become ingrained so you can act without emotions.
Stocks that breakout and move up with tremendous volume and close near the highs of the day seem
to work out best. However many stocks that move up 15% or more on breakout day often fail. You'll
just have to watch your stock's action like a hawk and get to see and understand these things over a
long period of time. If trading were easy everyone would be making millions. It's not; it takes years
and years of hard work and long hours.
Many traders employ a 30-minute rule, meaning that for the first half hour of the day many traders
do not buy any stock that gaps up in price. If the price holds after the first half hour then often many
traders will step in a buy the stock. I find this rule works good after the market has moved up for
few strong weeks and is not very effective at the start of a new strong move.
If its earnings season, then it's an absolute must that you know the date your company reports its
earnings. Many traders prefer to be out of a stock 100%
the day before a company reports
earnings
in case the company misses earnings or guides lower in which case the stock could plunge.
Others reduce positions substantially
the day before earnings
are released to lower risk as a
massive gap lower could be very destructive to your portfolio. The choice is up to you. If you have a
nice 50% gain or more, you might consider reducing 50% or so of your position and holding the rest
over earnings and you could hedge that position with some puts. You can see an earnings calendar
on this web site by clicking on the Useful Stock Resources link
here
. Please verify this information
by calling the company or visiting the company's website which you should be able to find in any
search engine.
*The market moves in waves that can last anywhere from weeks to months. Then a correction or
setback starts, which can last anywhere from 5 to 8 weeks or even as long at 4 to 6 months. If you
are starting a free trial and are a novice you may be lucky to join just as the market gets underway,
in which case you will see the full power of charting. If however you start after the move has been
going for sometime then things won't look as good as traders are paring down positions. Or even
worse the market could be selling down hard and working off the prior up move in which case you
will be completely discouraged. The power of charts is through waiting for the correction to end
whereby the chart patterns will then be fully developed. After weeks of base or pattern building,
stocks will begin to lift off and that's when the big rewards come in. The question is, are you willing
to wait and be here for the start of the next big move? The biggest mistake a novice can make is to
come back after a move has started.
*Please read a few times my interviews in Stocks and Commodities and Traders' Magazine at the
top of the home page of this web site. There are many tips and how - to's that will greatly improve
your ability to understand how this works.
More good comments can be found in the FAQ section of this web site in the member login area.
I give setups of stocks that are ready to potentially move. That's my job. Your job is to get to know
the stock and its movement along with the general market each day. You are the only one that can
do this in realtime during market hours. Then if a stock acts well (i.e. volume is very heavy and the
stock is moving easily out of the base) then that is the one to buy. I do not buy most stocks that
breakout as most do not meet my heavy volume/price action behavior during the day. Also, I buy
only the most expensive stocks as the percent loss is least if the stock pattern fails. High priced
stocks are the best quality stocks as a general rule in playing the market. Remember to buy as close
to the trendline as possible and the volume should come in at least 10 to 20 minutes after you buy
(or even earlier) and if not by then, you know no one wants the stock and might as well check out
early.
Thanks, Dan
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