Trading Lessons

COMPONENTS OF A TRADE

 

There are three main components of a trade, I will try and break each component down to more specific elements, for new traders learn and understand what these talking points mean. We invite seasoned traders to expand on these points

 

  1. Stock selection and number of shares
  2. Timing into a position
  3. Timing out of a position

 

1.         Stock Selection and Number of shares

 

            *Volume is a very important element

            *Relative Stregnth    versus  Sector and/or Market

            *Group Support –  is there any sector support?

            *Leaders – is your stock in the leaders or laggards?

            *Short Term Trend of the Stock    Where has this stock been?

            *Volitility    has there been a .50 -.75 range?

            *Thick Versus Thin –  Is there liquidity?

            *Market Support    Is there any?

 

2.         Timing into a postion

 

            *Buying strong stocks on dips

            *Shorting weak stocks on bounces

            *Using size to get into a position    Proper and improper methods

              (Watch the bid and offer    i.e.  1×999)

 

3.         Timing out of a position

 

            *Set profit goals and maximum losses

            *Stock quickly moves in your direction – faster it moves the faster you want out               

            *Characteristics of your stock changes

            *Stock quickly moves against your direction    Don’t panic!!!

 

Trading Lessons

Resistance is not futile!

 

A resistance level is just what its name implies, an area in which resistance to further advance or decline is evident.  Resistance levels are generally seen when the market is in what may be termed the marking time stage between important moves.  The market spends most of its time in so-called trading ranges, that is, comparatively narrow areas where is well-defined resistance at the top to further advance and equally clear support at the bottom to prevent further decline.  Many short swing speculators make a practice of taking positions based on these trading ranges and will sell out or go short at the top of an established trading range, where resistance has previously been noted; they will also cover short positions and long when the market reaches the support area of the trading range. It is therefore very important to be able to recognize the characteristics of a break-out from a trading range.  A short position taken at the top of a trading range becomes a very bad position if the market develops enough strength to decisively pierce the upper resistance level and by doing so indicates that a sustained up move is getting underway.  Under such conditions, it is necessary for the trader to reverse his position quickly.  It can be stated that the longer period of time over which a trading area has been in effect, with its visible support and supply areas, the greater will be the move when the market finally breaks through either the top or bottom resistance level.

 

A resistance level is frequently a component part of many of the typical chart formations in use. A double top indicates top resistance level while a double bottom the opposite. Occasionally triple tops and triple bottoms are witnessed giving evidence of even greater well defined resistance. Over time I hope to explain many more chart patterns and open them for discussion.

 

 

 

 

 

Noah Hochman

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