Stock Market Buying Guide - The Daily News

Patterns for Profits Newsletter - March 7, 2008

Following the News
Need a guide for buying in the stock market? You have a successful system for following your investments, buying, selling taking your profit. But, what will be the next hot stock that no one has seen yet? What disaster is waiting to befall a successful industry? How do you improve your ability to anticipate investment opportunities? Follow the daily news.

A great stock market buying guide is the newspaper. What is the news of the world? Many successful traders start the day reading the news and not just the business section. So much of successful trading is knowing the psychology of the herd. A good stock market buying guide is to go against the flow. By the time news about a stock hits the front page of your local paper, or even the major business publications, the stock has reached its peak and it is time to buy puts.

You may have a successful trading system but using the news as a hint for where to look can be a successful stock market buying guide. Where does the investment web page you subscribe to get its information? Go the the source. Stay in touch with the world. Follow current events, long term trends in the arts, sports, fashion and whatever else interests you. An informed view of the world will help you develop a successful stock market buying guide of your own.

Then, follow your investment plan. Execute your trades and walk away with a profit.

Perspective in Choosing Investments
A successful stock market buying guide includes keeping a broad perspective. Corn prices and corn futures are "in." Everyone has bought into ethanol production. But, how about feeding the world? When all the corn goes into ethanol and into your gas tank what will people eat? Will wheat prices go up? How about soybeans, farming in Brazil, farm implement manufacturers? If the USA does not export corn will the shipping companies suffer? If the US does not export corn how much worse will our balance of payments get? The broader your perspective, the better your ability to pick investments will be.

You might follow the news for weeks and find no useful investment information. Then one piece of news links to another in your head and changes your perspective. A pattern emerges. You have a new stock market buying guide for what stocks to research.

As you keep up with the news, stick with your trading plan. Introduce a new stock or two to your list of stocks to watch, stocks to trade. Having a great new stock pick does not guarantee profits, only opportunity. The news, whether local or national, is a great stock market buying guide. Stay up to date with current events. Watch trends. Look for patterns. Broaden your perspective. Compare what you read with the more formal investment advice from brokers and online investment sources. Become your own expert when it comes to stock tips.

A broad perspective can improve your long term investment strategy. Successful traders have the discipline to follow their plan. Success long term also depends on what investments you are dealing with. A great trading system can be made average by mediocre stocks. Use the news as a stock market buying guide to add and subtract from the stocks you watch, the stocks you trade. Find a new stock. Follow your plan. Enjoy your profit over a cup of coffee while you use the local news as a stock market buying guide. You might even find something interesting to do to help you enjoy all that money you will make.

Patterns for Profits Market Watch

Since the large decline at the beginning of this year the indexes have been consolidating this move. We have seen larger ranges than this time last year in the SP 500 Index. Recently the SP 500 March Futures contract formed an AB=CD sell pattern at the 1390 level which was also at the .886 retracement level. There is a potential AB=CD buy pattern forming on the Daily SP 500 chart. Should the lows of January be broken we would expect the downtrend to continue.

The last several weeks the market has been coiling and a larger move in the form of a trend can be expected in the coming weeks.

Patterns for Profits Trading Tip

Tracking Trading Statistics - Excerpted from ‘Trade What You See – ‘How to Profit from Pattern Recognition’ by Larry Pesavento and Leslie Jouflas, Wiley & Sons 2007.

Tracking Performance

As we have discussed, building a trading plan will teach the trader to keep focused on what they are supposed to be doing and focused on the process of trading. Adding to the trading plan statistics on the trader’s performance is extremely beneficial. When you think about it how else could a trader identify problem areas or evaluate their true strengths without some system for doing so? Each trader should have a system that collects objective data on trading performance. It would be hard to imagine a scientist not collecting and analyzing data in order to complete a scientific experiment.

Athletes focus and collect their performance data on a continuous basis. Traders must learn to realize that because trading is a performance based arena with many components contributing to success or failure, each piece of data is important and will contribute to the success or failure of that trader.

In real-time many things can happen quickly that can contribute to profits or losses. Each action the trader takes will contribute to either the profit side or the loss side. At the end of the day, week or month it is easy for the trader to overlook important information that contributed to either.

The trader may not remember or may rationalize a random trade or other trading errors that will keenly affect performance. It is vital that the trader have some system of monitoring their own performance. It is also important to learn correct habits that build strengths and eliminate weaknesses. Creating a system to accomplish this will only benefit the trader. This can be accomplished by recognizing what is traded according to the trading plan and what are trades or actions that do not fall into the trading plan.

It is an unfortunate reality in trading that even trading errors can make a profit. These will re-enforce very bad trading habits. These types of wins will instill a sense of false confidence. It wrongly tells the trader that if it worked once it will work again. This is usually not the case and eventually the trader will pay the price.

Keeping track of performance can give the trader an objective view of what needs adjustment. It is an opportunity to improve performance. We will cover some basics of trader statistics to keep track of. Again we would like to refer you to Trading Risk by Kenneth L. Grant and Enhancing Trader Performance by Dr. Brett Steenbarger for an in depth study of these statistics. They both give excellent information and guides on setting this information up.

Learn Real Trading … Real Time …with Real Traders – Online!

Visit our homepage to sign up for our 5 Day Free Trial

www.tradingliveonline.com

Leslie Jouflas
Kelly Hill