Trading Lessons

COMPONENTS OF A TRADE

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!!!

Noah Hochman

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Noah Hochman

2 Comments

  • It’s hard to say which component is most important but trading in the direction of the overall market is an absolute must. It’s been said that 70% of a stock’s price movement is influenced by the overall market trend.

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