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RULES, RULES, AND MORE GOOF-PROOF RULES
Be sure to check out
www.tradingsmarts.com/stocks.htm if all you're looking for are rules for day
trading and/or position trading. And, we also have trading tips 'n
tricks at
www.tradingsmarts.com/tips.htm.
STICK WITH THE RULES AND GET ORGANIZED
Rules rule the world in trading. W.D. Gann really didn't care about
what a company's earnings were. He didn't care what a company's debt ratio
was. What was more important to him was the price that the market was at
and the time that it was at it. He was the first one to really take a
scientific approach to the markets with price and time, and patterns that would
develop and repeat. "The public loses because they do not stick with
a well-defined set of rules and cannot organize themselves." Jake
Bernstein echoed this sentiment: "Traders need simple system rules that
don't require a great deal of judgment or thought." Get the rules
in my book at
www.tradingsmarts.com/order.htm.
THE GREATEST SECRET OF THE STOCK MARKET
Did you know that the greatest secret of the stock market is not buying?
It's selling. Never keep a loser, and never dollar-cost-average down.
Protect your capital so you'll have enough to invest when the bull returns.
In a survey of professional and semi-professional traders, 95% of them agreed
that failing to cut losses resulted in the largest trading loss they ever had.
This lack of self-discipline is the single most common thread to most traders'
losses. The most common reason cited for not cutting the loss early was
that they thought the stock would "come back". Simply controlling your losses
and setting stops (actual or mental) will dramatically improve your bottom line
profits.
You won't find this feature with any other broker that I am aware of: At
CyberTrader, you can implement a trailing stop loss that actually follows your
order on its way up automatically. You do nothing. It doesn't just
rest at a stationary price than can so quickly fall outside your trading
strategy. This feature is a dynamic safety net for your trades. It
protects your profits, and limits your losses. All you do is pick the stop
loss criteria, and then sit back and let CyberTrader provide the automatic
executions. Pretty cool, eh?
ONE SIMPLE NUMBER SMASHES MEASLY RETURNS! Did you know that one
simple number in a company's financial statement could point you to sky-high
profits?
And did you know that a 20-year academic study PROVED that companies who have
this number moving in the right direction return an average of 15% a year...
compared to the measly 7% a year you'd get from companies with a bad number?
You might find it interesting to know that the number I'm referring to is
"Number of Shares Outstanding." So what, you say? Who cares what how
many shares of a company's stock are outstanding? Tell me about revenue
growth, cash flow, earnings!
You SHOULD care, because companies where the number of shares is declining
have an AWESOME probability of outperforming the market!
The reason is simple: when companies buy back their own stock, they are
voting with their shareholders money to invest in something that they KNOW is
dirt cheap - their own stock. These companies aren't stupid - they only
buy their own stock when it's low and sell it when it's high.
Buying back shares makes the stock go up for good reason - other investors
see the company's confidence in itself. And simple algebra tells us that
current earnings divided by fewer shares means INSTANTLY higher earnings per
share!
As companies reduce their shares outstanding, the earnings per share increase,
making each share more valuable. This is ultimately reflected in share
prices.
The stock of an average company announcing a repurchase plan will beat the
market.
Makes sense, doesn't it? After all, when a company buys back their own
stock, it's an enormous vote of confidence by those who know it best - senior
executives.
But, those executives aren't talking. They keep their plans, tactics, and
research behind closed doors. The only indicator of their well-founded
optimism is a stock buyback. It's a powerful indicator that no serious
investor should ignore.
In the last 10 years (up to 2001), if you had invested $10,000 in a typical S&P
500 portfolio, your investment would have grown to $67,917. But that same
$10,000 invested exclusively in value buyback stocks would have grown to
$130,254 - nearly $70,000 more in profits!
Buybacks are announced almost on a daily basis in the financial section of
national newspapers. All you have to do is unearth them and voila!
DOW DOGS – BEAT THE DOW OR ANY INDEX
One of the most common
yardsticks used to measure stock performance in the U.S. is the Dow Jones
Industrial Average (DJIA); the goal of many professional money managers is
to meet or beat the performance of the Dow - the world's most popular
market gauge - and, yet, as dull as a car's odometer, but still a good
barometer. It includes only 30 stocks and is weighted by stock
prices, rather than market capitalization.
The Dow is the number that daily measures the market
for Main Street. It is referred to as the benchmark of the U.S.
market. It carries a lot of weight with traders who consider its 30
blue-chip stocks the ultimate bellwethers of the U.S. economy. There have only been 16 changes to its composition
in the past 20 years, and there were no changes at all between 1959 and
1976. Talk about stability.
According to "Mr. Dow" - market strategist Charles
"Chuck" Kadlec - the Dow will advance at an 11.1% annual rate long term,
which means it would double three times in less than 20 years. Just
by way of comparison, Warren Buffett - the Wizard of Omaha - believes
returns during the next decade or two will average about 7% a year after
inflation and frictional cost such as trading fees.
The DJIA is an average
of the prices of 30 major companies whose stocks are listed on the New
York Stock Exchange. The Dow uses a weighted number that takes into
account stock splits and dividends when determining the index’s movement.
There is an investment
strategy that historically has outperformed the Dow Jones Average more
often than not.
STEP ONE
List all 30 stocks
included in the DJIA from highest to lowest in terms of dividend yield.
STEP TWO
Select the 10 stocks
with the highest dividend yield, and invest an equal amount on money in
each. You’ve just bought some of the biggest and most well-established
corporations in the world at a value price.
STEP THREE
Repeat the process
each year at a set time. Adjust the stocks in your portfolio as
necessary, making sure that the stocks included in the portfolio have the
highest dividend relative to their prices.
History has shown the
10 highest dividend-yielding stocks have typically provided investors with
above-average total returns. In fact, this strategy has outperformed the
DJIA 14 of the past 20 years.
This strategy is so
successful because the companies listed on the Dow are well-established
and financially sound. This gives them stability and staying power even
during economic downturns. The 10 highest-yielding stocks are typically
companies that have been temporarily undervalued by the marketplace.
Therefore, when these companies rebound, they are likely to provide you
with an above-average total return. The strategy buys equity stocks that
are out of favour. This “contrarian” discipline has historically yielded
above-average returns for equity investors.
It appears this
strategy will work with other indices as well. If you’re considering
investing in Canadian or other markets, this strategy provides a simple
way to add global diversification to your portfolio.
WINDOW DRESSING
Window
dressing is a term used to describe the process whereby mutual fund
portfolio managers sell the "bad" or unpopular stocks in their portfolios
at the end of their reporting quarters in order to buy stocks that have
performed well in that same period. They do so because they must
provide shareholders with reports of stocks they own on the last day of
the quarter. By buying the best performers, they seduce shareholders
into thinking that they have owned the best stocks all along. Boo
hiss.
As you can
appreciate, this trickery tends to create selling pressure in
underperforming stocks and buying pressure in outperforming stocks going
into the last week of every quarter. Knowing this, short-term
traders who short the biggest losers and go long the biggest
winners of the quarter earn nice quick profits.
THE JANUARY EFFECT
What happens in January is generally
seen as a precursor to the strength or weakness of the stock market during
the remainder of the year. Small caps tend to do well in January.
The first three trading days of January are almost always up, even in a
bad year.
The January Effect is associated with a
tendency for stocks, particularly those of small firms, to rally in the
first two weeks of the year. This phenomenon is generally associated
with December/January portfolio adjustments or "window dressing" by fund
managers.
RULES TO PICK STOCKS BY
Smaller caps are suitable for patient
investors with a long-term horizon. They tend to outperform their
bigger cap counterparts over the long haul. From a trading
perspective, lack of investor enthusiasm for smaller caps translates into
lack of liquidity in these stocks. Consequently, you get significant
gaps between the bid and the ask, and it's not always easy to sell your
stock at the price you want. Small-cap stocks are risky and
volatile.
If you're a day trader, you are
primarily interested in EPS, volatility, volume, and good trading
technique. You will find more on these at the following pages of our
Web site:
www.tradingsmarts.com/stocks.htm, and
www.tradingsmarts.com/tips.htm.
I'LL LET YOU IN ON A LITTLE
SECRET ...
Profits are STILL the KEY to stock
market fortunes!
RULES TO PICK BONDS BY
When you buy bonds, the single most
important thing to consider is inflation. Benign inflation trends
favour the maintenance of low long-term interest rates, which in 2001
dropped to the lowest point in three decades.
LOOK OUT BELOW
Stock prices usually fall on the
announcement of a convertible debenture issue because investors buy the
debenture and short the underlying shares, putting downward pressure on
the stock price.
THE 10 PERCENT RULES
Did you know that 90 percent of all stock shares are owned by 10 percent of the
people. Find out how you can join that 10 percent in my book "HOW TO
TRADE LIKE
A PRO IN ONE HOUR". It is available to you now if you go
to
www.tradingsmarts.com/order.htm. Get
inside the heads of the world's most successful traders, and find out how even
the smallest traders can benefit from the investing patterns of the richest
folks.
THE BUY, SELL ADAGE ... BUY THE SNOW, SELL THE SUN
Buy when it snows, sell when it goes. Over the past 50 years, you would
have profited immensely by buying at the beginning of November and selling at
the end of April. Traders traditionally gobble up more than just turkey
between U.S. Thanksgiving and Christmas, with the market up 88 percent of the
time.
JUST CALL ME BABE RUTH
Baseball coaches tell their players that hitting for power alone is the surest
way to strike out. Not every fastball is going to be driven over the
fence. The focus should not be home runs. It should be singles and
doubles. In trading, as in baseball, the focus should be on incremental
gains, not going for the gusto.
In addition to stock market investing basics and stock market successful trading
strategies, we have kept the best to the last for you. Whether you trade
commodities, currencies, markets, or stocks, it doesn't really matter. We have the secrets
of the pros waiting for you at
www.tradingsmarts.com/bigdogs.htm. Or, better yet, don't hesitate.
Run, don't walk, and get a copy of my book right
now at
www.tradingsmarts.com/order.htm. |
BIG
DOGS EXPOSED 
