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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."
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.
List all 30 stocks included in the DJIA from highest to lowest in terms of dividend yield.
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.
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 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
Sound familiar? You have spent years surfing the 'Net, and studying books and charts in search of commodity trading rules, a currency trading strategy, or stock market successful trading strategies. All you really want is the 'Holy Grail' of entry techniques. You usually end up adding one indicator on top of another, switching from one guru to the next, until you are so confused and unsure of your entry system that you are unable to make entry decisions and stay organized. You get so distracted and frustrated that you quit watching the markets all together!
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Over 76% of our readers have been trading four years or more, while almost 24% have been at it for over 20. Even experienced traders know they have more to learn.
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