Is Trend Following The Right System for You?

The strategy of trend following goes against the old Wall St.  Philosophy of buy low and sell high.  It takes merit of the market whether the present trend is up or down.  Traders using the trend following method begin trading after a trend is already established.  Other traders attempt to predict what the market will do, trend followers wait for the market to do it.  The size of the trading account and the volatility of the issue are the primary determining factors in how much to invest. 

Click here to see a trend following strategy that generated 48% return last year.

The systems that monitor trend following are pre programmed to exit if there is an unexpected downward turn to the trend.  The trader will wait and re-enter if the trend re-establishes itself.  The point of trend following is to follow the trend after it is established.

Price is the 1st rule of trend following.  Other indicators are not important, although they don’t seem to be entirely overlooked.  The second factor is the choice of how much to trade.  The timing is less vital than the amount of the trade.  Then there is the exit strategy.  When to get out if the trade is unprofitable or if the trade is profit-making.  Finally, you must set a stop loss for the maximum sufficient loss.

These traders use their software to test trades before investing.  The software can guage the risks against the potential benefits of the transaction.  The assorted factors relevant to the trade are programmed into the software and the trader makes his call based on the result of the test.

One difficulty with trend following is the impact that unanticipated events can have on the market.  Political upheavals, natural disasters and other events can effect the market in both negative and positive strategies.  When Hurricane Katrina cause massive damage to grease rigs and pipelines in New Orleans, the price of oil and petrol zoomed in the expectation of deficits.  Even though no severe shortages happened, stockholders and trend followers, in both the stockmarket and the commodities market, kept the price of oil raised for months after the event.   

By definition, all stock market investing is speculative.  Following trends is a specific method for taking advantage of highs and lows in the market and using them to your own advantage.  Unlike hot stocks, which involve holding stocks for extremely short periods, hours or days, trend following involves keeping stock for longer periods, though the basic principle is quite similar.  In trend following one might hold the stock for a week or a month depending on the trend. 

In the market there is no assured strategy for earning profits.  It’s a necessity to have a plan or you will certainly lose money.  Trend following should by one of several strategies you employ to maximise your gains and minimize your losses.

Learn how you can apply trend following to ETFs and generate great returns with low volatility.

Fast Profits With Hot Stocks

There is a new game in the stockmarket nowadays called hot stocks.  This goes against the normal Wall St.  Recommendation of buy low and sell high.  The new hot stocks strategy is to buy high and sell even higher.  The way it works is that you purchase stocks that are rising in price and sell them while they’re still rising.  The time between the buy and the sale is short. 

Find out what hot stocks are worth buying today.

Rather than purchasing undervalued stocks and waiting weeks or months for them to rise in worth, with the hot stocks approach, you buy stocks that are rising in value .  Instead of holding the stocks, you wait only a short while and sell them when their value is higher than the price you paid.  You turn a fast profit. 

This approach works very well for day traders.  You must have your finger on the market’s pulse.  When you see a stock that’s rising in price gradually, you purchase the stock.  Have a time limit set for holding the stock before you purchase.  You can even sell the stock the same day as you bought.   

If you chance to pick a stock that starts to stagnate or drop in price, sell it straight away, even if you have to take losses.  Never think the stock will recover and you’ll get your investment back.  If it drops lower you can lose even more.  The idea is to maximise your gains and keep your losses to a minimum. 

In many cases, you may sell the stock only hours after you purchased it.  To use this idea effectively, you have got to constantly observe your stock prices and keep on top of the market’s trends.  Hot stocks are a high risk gamble that occasionally does not pay off.  Learn from your losses and celebrate your gains.  If you can a profit on 2 stocks and lose on one, you are still before the game.   

Don’t put all your money into hot stocks.  This is just a method to earn a profit in the stock exchange.  Investors should have a portfolio with solid stocks from different areas of business to protect their investments.  Don’t neglect your long-term investments in favor of hot stocks.  Some of your profits from hot stocks should be put into long tern investments. 

The idea with hot stocks is to get in and get out.  Even if the stock continues to go up after you sell, it isn’t money out of your pocket.  Remember it might just have easily dropped and cost money.  Buy, watch the price and sell when you have a decent return on your investment.  Don’t be greedy.   

If you are paying a brokerage for your investments, hot stocks isn’t an option for you.  Brokerage charges can swiftly swallow your profits.  Look into online stock services that charge a set weekly or monthly charge for unlimited trades.  Trans action charges can be very pricey.  Let your brokerage firm handle your long term investments, look after your hot stocks yourself.  

The stockmarket is a way to grow your investments.  Hot stocks is one way to make reasonable profits in a short amount of time.  When investing your money always use more than one system and make sure that at least part of your money is in a safe, if low yield, financial instrument.  Never gamble on the market with money you cannot afford to lose.  Remember the old Wall St.  Saying” often you eat the bear, and sometimes the bear eats you.” Good luck!

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Trading Without Some Computer Tools Is Like Flying Blind

More than ever before, computer trading is taking over the markets.There are computer programs to execute orders, scalp and arbitrage 1000s of times a day, and even programs and tools designed to exploit the weaknesses of other tools that are in the market.  There are hundreds of companies that have created sophisticated charting packages to help day traders find ideas, including day trading robots.  All of this points to the same thing:  computers are here to stay, its up to you as a day trader to figure out how to get the best tools to find ideas to make money.

This does not mean throw thousands of dollars at every "hot" product - this usually does nothing to generate anything useful.Additionally, each day trader can only focus on so many things at the same time, you do not need overload as that can actually backfire and make it far worse.  Some people like to use a day trading robot to help, others like to put together a set of indicators with some basic useage rules and that works for them.You need to establish a decent regimen for finding ideas that is followed the same way each time so that ideas are considtent.Those will never be consistent or valuable in the long run because of the sporadic nature of how they are created.

When it comes to computer tools to help you, there is an additional thing to consider:  you can get a program that allows you to custom write your own rules and indicators and then apply them in real time.This is a good options if you are a more experienced trader and have the programming knowledge (or want to learn) to get the job done.  This can be very very time consuming, and often you can spend hours or days of work only to discover that the theory you are testing is not valid and all the work is wasted.  In fact, if you go down this path, this will happen quite often but is part of the learning and development process.  Some day traders who go down this path will do part of it themselves, then get an outside person to help them finish some difficult parts.  Indicators are quite simple as far as complexity, and then you have the other end of the spectrum which is a day trading robot which usually is quite complex because of all the parts that go into creating such a tool, so plan your time accordingly.

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