When to add to your position when trading the market:

I have not met any trader who has not once in their trading career used the strategy called averaging down. It is when you add to your position at a better price than the original thereby making your average entry better. It sounds smart, as if the stock was a good buy at 20 it must be a great buy at 15. It also compliments the old saying; buy low, sell high. There is just one thing; adding to losing trades is a one way ticket to failure! By adding to losing trades means you will ALWAYS add to all the losers and only some of the winners. The best winning trades are the ones that take off immediately and you will not be able to add to these trades. So the averaging down system sounds smart on the surface but the truth could not be any further from that. …continue reading Adding to position in the Stock Market

Charles Carlson highlights key elements in trading:

It is very rare that I find any useful comments on CNBC.com from a “pro” or “strategist” but it does happen from time to time! The problem is CNBC.com publishes what sells and not necessary what is useful for the reader which is of course not only CNBC’s fault but also the readers fault. Many traders look for excitement in trading and are therefore drawn towards, for example, doom and gloom headlines. The thing is, successful traders don’t care where the market is heading in the future, they only care that they read the current market correctly. Dow might be heading for 5000 or 15000 in 2013 but what happens right now is more important as traders cannot afford unlimited drawdown. What would happen to the trader if on the way down to 5000 Dow climbs 20% which then gives the trader a margin call? The trader would lose all his/her money and therefore not be able to profit on the prediction of the Dow hitting 5000. …continue reading A hidden gem on CNBC.com!

Know when to trade and when not to!

There have been a few quiet weeks as the market has been range bound, not able or willing to make up its mind so we continue to see the market rally, only to drop again. We also see the market dropping then see it rally again therefore this type of market is a market that traders should refrain from trading in.

…continue reading When in doubt – Stay out!

Traders/Investors move the market – News is only an indirect reason.

We often read and hear interviews in the news where some guy predicts Dow will go to, for example, 5000 or 15000. These predictions are often based on looking at a macro economy such as GDP, unemployment rates, interest rate and so on. Other predictions are based on computer programs which run a lot of mathematical calculations. If predicting where the market is heading was that easy we would see a lot more successful traders than what we are seeing today. …continue reading Trading is a numbers game.

React on current market conditions instead of predicting future moves:

Today I read an article on CNBC.com where a strategist called Charles Nenner predicts Dow will hit 5000. Original article can be found on this link: http://www.cnbc.com/id/38826988. He not only predicts that Dow will hit 5000 but he also gives a time frame which is 2 – 2.5 years. Nenner uses cycles in order to predict moves and dates. Here at Stock-Market-Strategy we  believe in cycles. The stock market, real estate market and commodities all move in cycles. Nothing goes up forever and we will always see bull and bear markets. But this is as far as we go when it comes to cycles. We do not use them to predict market moves as there is no rule saying that a cycle has to be a certain length, making it impossible to predict moves without a big margin of error. …continue reading Reaction Vs. Prediction

Preserving Capital is a Stock Market Strategy

Since our last update we have been waiting for some significant price action so we could identify some trading opportunities. We identified that we were seeing what we consider a Head and Shoulder chart pattern which is a bearish pattern. Despite us saying that this is a bearish signal we did not recommend that this was the time to go short because the market was oversold and due for a rally which has now taken place. Due to the lack of follow through to the downside we will be sitting on our hands waiting for further evidence.

When we turned bullish in June after taking out resistance we also experienced a lack of follow through. …continue reading Cash is a Position Too!

Market Confirms Head and Shoulder Chart Pattern

After a few weeks of indecision from the market it has now decided to show its hand. Two days ago something significant happened. The SP-500 Broke its long term support area thereby confirming the Head & Shoulders Pattern which is prominent when looking at your daily chart.

The trades we took at the support area which were our “dipping our toe in the water trades” managed to give open profit …continue reading The Bulls turned out to be Cows! – Market Update 07/01

Get Back on the Bull and Ride it Up!

If you have been following our market analysis for the last few weeks you will have noticed that we have been spot on with our overall market reversal points. So, we have not only made you money but we have also saved you money!

In April we notified you that there were some overlapping bars and you should start taking profit on February’s positions and, that if we were to see price close under the levels that we suggested, the price would likely retrace/pullback therefore meaning all bets were off, which I am pleased to say it did. …continue reading The Bulls are Back in Town – Market Update 06/16

Price Action is Setting Up Nicely: Stock Market Update 06/03

Welcome to this week’s update. As you can see by the SP-500 Chart, the drop for the last few weeks is now starting to form some sideways bottoming consolidation.

If you have been following us you will know our bias is to the long side still based on the fact that the trend has come from the upside and that the pull back is in line with our trading criteria. Having said this, the last few weeks have been very volatile and have started to show signs of short term market weakness which over time could be setting up for what we describe as a Phase 3 sideways Market. This is not proven but the longer term pull back of the MA’s might suggest this is in the near future, however we still expect a retracement close to previous highs as a minimum. …continue reading Setting up Nicely – Market Update 06/03/10

Get the Right Entry by Timing your Trades

We have been quiet the last few days because we think it’s at this stage when doing chart pattern analysis is the most important time to be 120% focused. For the last 3 weeks the media has focused on how bad the markets are globally when this is not necessarily the case.

Timing Your Entry Chart 1

If you have been following our updates you will be fully aware that we called the top in April and have been stating our position in the market which is cash is king and be ready on the sidelines. …continue reading Timing Your Trades | Watchlist