Stock trading is dangerous: You can get trampled by a bull, or get mauled by a bear. It always pays to be safe, and a trader who trades cautiously is a life lived long. For those of us who walk the cautious road and avoid the two lethal emotions of greed and fear–wherever possible, trading should be more or less safe. Right?

Not in the slightest. See, it turns out that even past market action and support levels can be as dangerous as any bull stampede or bear attack, and you can just as easily kill yourself not looking at the right support level or pivot point as you could playing Russian roulette.

For master stock traders, it is crystal clear at what price levels the stock market will reverse on the DOW, NASDAQ, and S&P 500.

In my new short video I will tell you the three price levels that I think will reverse this market.

Right now the trend is up for all the indices and you should only become negative on these markets should the three levels I show you break.

Technorati Tags: a trader who trades cautiously, emotions of greed and fear, master stock traders, reverse this market, stock trading, trend is up for all the indices

Here’s a guy who didn’t let what clearly should have been fatal trading injuries stop him from kicking mind-boggling amounts of badonkadonk.

Who?

An accountant who got fed up with his office manager and other office BS who quit his day job to become a full time day trader from home.

Devastating Wound(s):

At one point during the Battle of Office Hag, Major Jeff Cooper decided that his days of being pounded by an office manager for about $100 a day had come to an end. Instead, he apparently resolved to deal with any future office goblins personally.

Not only were things going bad at work, the Major caught his wife cheating on him and was filing for a divorce.

Not only were things going bad at home, the Major was just a private back then, in terms of trading, and he lost his nest egg in the Tech Bubble Crash: $45,000 gone in the blink of an eye.

Anyways, back to the Battle of Office Hag. At one point, after being falsely accused of stealing, he did the kind of thing that most of us only dream of doing: he quit and just happened to hit the power switch on the company’s main server as he walked out. He also called Microsoft to report the pirated versions of Microsoft Windows and Office that 15 people had on their computers in the corporate office. My hero.

The Awesomeness That Followed:

About seven years later, Jeff had his first $80,000 year stock trading from home.

This is how Jeff did it.

Early on, he realized that strongly trending markets tend to pullback to major Fibonacci retracement levels of 38.2%, 50%, or 61.8%, before rising again.

What occurs is that a strongly trending (runaway) market will take a number of days rest before continuing its trend. This is very true within the early phases of the move. The rest, or pause, will come in the form of sideways movement or a couple of down days (up days for downtrending markets). This comes mostly from people who were fortunate enough (or smart enough) to have purchased the stock at lower levels (or in downtrends, who had shorted at higher levels) and now want to lock in their gains. However, this pullback, or relaxation, can be utilized by the momentum growth funds and traders as a signal to accumulate extra stock at lower levels (or, on the downside, unload stock at higher levels), subsequently once again causing prices to move higher and creating more momentum. How far these shares run is totally impossible to forecast but the bottom line is to climb aboard early and let the market go where it’ll go.

But where did Jeff enter the market to provide himself with the highest possibility of profit while taking the lowest degree of risk?

He identifies only the strongest trending stocks and, with the use of an oscillator, pinpoints when the pullback will likely exhaust itself and the trend will resume.

For those of you who are new, ADX stands for Average Directional Movement. The ADX measures the strength (not direction) of the trend. The higher the ADX reading, the stronger the trend. Jeff only trades stocks whose ADX reading is 35 or higher. This means he is only looking at stocks that are moving strong in one direction. To identify the direction, he uses the ADX +DI and -DI. Simply, if the trend is up, the +DI will be greater than the -DI and if the trend is down, the -Dl will be greater than the +Dl.

Therefore, Jeff only buys into strongly trending stock (its ADX reading must be 35 or higher) and its +DI reading must be higher than its –DI reading. If we are looking to short a downtrending stock, the ADX reading must be 35 or higher and the -Dl reading must be greater than the +Dl reading.

The second indicator Jeff uses is the stochastic. Stochastics are a mathematical formula that is based on the fact that as prices increase, closing prices tend to be closer to the upper end of the price range, and as prices drop, their close is usually near the bottom of the daily range.

Conventional wisdom states that when readings get under 40% the market is oversold and above 60 % the market is overbought. There are four components of stochastics — Fast % K, Fast % D, Slow % K, and Slow % D. The only one Jeff uses is the Fast % K. This is an extremely sensitive component, and it allows Jeff to better measure overbought and oversold conditions.

Jeff uses an eight period Fast % K for his calculations. In uptrending markets, he wants the Fast % K to drop to 40% or under. This means the market has pulled back (oversold) and there is a higher than average likelihood the market will again move higher. In downtrending markets, he wants the Fast K % to climb to 60% or higher. This means the market is overbought and the downtrend is likely to kick in again.

Technorati Tags: ADX stands for Average Directional Movement, badonkadonk, battle of office hag, stock trading from home, strongly trending (runaway) market will take a number of days rest before continuing its trend, trading injuries, trending markets tend to pullback to major Fibonacci retracement levels

Let’s say, for example, you receive an email, text message, or fax spam about a stock that they say will go up in value, and at the same time the share price is up 15% because someone else is buying it. Then you short sell it because you know it won’t stay up for long and that it’s just a pump and dump. You have absolutely nothing to do with the pump and dump and don’t know the other people who are actually doing it.

1. Is it illegal for me to short sell the stock?
2. Would then even work?
3. Do stocks still move when a pump and dump scam happens or is that something that just happened back in the 90’s with the advent of the Internet and the slow response of the SEC in regulating?

You can not do this. This is illegal because you are trying to profit off of what you believe to be illegal activity. Proving it might be another matter but being hard to prove doesn’t make something legal.

This very likely will not work. Any stock small enough to be able to be affected by a pump and dump likely can’t be shorted (i.e. over $5). And anybody allowing you to short a stock like that which they own is going to want a high premium and there goes your profit. You are assuming the person selling you the short position is ignorant of the stock or the pump and dump scheme.

Stocks that can be influenced with a pump and dump are basically a fraud and many of those stocks are fraudulent from the start or are extremely high risk even without the manipulation.

If you lie with “dogs”, you will probably get fleas.

Also, if you are that hard up for a good stock pick that you have to try and time pump and dump scams in penny stocks, you need to go back to “investor school” and learn how to trade before you lose everything.

Technorati Tags: pump and dump

I’m just gonna say it: Gold and gold mining stocks were great investments in 2009. But so what. That was then. We make money by betting on the future, not the past.

What does the future hold for Gold?

In the video below, I give you five reasons why I think gold is not going to make a new high right now.

If the current cycle continues, there will be some excellent profits to make in this market and a possible new high before summer.

Urgent Update for anyone struggling to cash-in with stock trading: You already know “back-testing” is worthless in the real world of stock trading…

How the
Little-Known “Wisdom”
Of A Former Floor Trader Is Quietly Making
A Small Circle of Stock Traders Richer Than Rock Stars!

Everyone wants to buy at a bottom and sell at a top. The dirty little secret is that this is not possible to do on a regular basis.

Instead, you need to catch the sweet spot of the trend. The sweet spot is the 70% to 80% that’s in the middle of a trend.

I’ve been stock trading for more than 30 years and I can tell you that what is preventing most traders from making good money is that they are trying to buy bottoms and sell tops. Nobody buys the bottom and sells at the top. If they tell you that’s what they do on a consistent basis, smile and as soon as they turn around you need to put them into a rear naked choke for lying to you.

In the short video below, we look at crude oil and how you can spot the big trends.

The stock trading tool you will see in the video below can:

The video is free to watch and there are no registration requirements. I hope you enjoy the video and make a comment on our blog about how you feel about the crude oil market.

Technorati Tags: buy bottoms and sell tops, stock trading, trend trading

Stock traders love to play the blame game. They blame a company, a CEO, a stock, a market, the economic cycle, whatever. What they don’t do is blame themselves.

Just when you think they might have learned from their mistake, they’ll screw it up again with some new, baffling mistake.

But the mistakes really aren’t new. Everyone has made them.

Here are the 6 most common mistakes stock traders make because they fall back on the same gimmicks to try to squeeze a little more cash out of a stock.

1. Research shows that it often takes a long time for a loser to turn around. Most amateur traders hold on to losers much too long. They go from having a profit thesis to getting down on their knees and praying for their stock to reverse. Save the church drama for Sunday and if you want to pray, go be a preacher. You’ll make more money that way. Get rid of your losers quick and let your winners ride.

2. When a bullish profit thesis fails, sell the stock. Do not wait for fundamental confirmation. Believe what you see. Amateur traders hold on to a dog because they don’t know why their stock sold off. As a result, they erroneously believe their stock will come back and that the next earnings release will prove this. Do not use fundamental analysis as a way to confirm technical analysis. Chart patterns and price action happen long before the fundamentals do. Chart patterns and price action lead the economic cycle by anywhere from 3 to 9 months.

3. Avoid buy low, sell high, a.k.a. valuation investing. Do not go “bargain hunting”. Stocks going down are the wrong stocks to own. Value investing is the skilled art of buying low and selling even lower.

4. Watch out for stocks that are in a trading range and then suddenly break down. The trading range becomes a major top that forms solid resistance against future price rises.

5. Do not bottom feed. Buy strong uptrending stocks, not weak stocks you think have formed a bottom. Bottom feeding is for skilled master traders only, and even those guys use tight stops. Bottoms are usually not sideways action but instead are ‘v’ bottoms: quick intra-day lows that rebound much too fast and make the spread between the bid and ask so whacked that most amateur traders never get their orders filled. Nothing can be more funny than watching a know it all claim that a bottom is in place when he eyes a stock going sideways over several weeks or months, and then watching him lose his shirt as the stock breaksdown. Just make sure you’re not the laughingstock.

6. Don’t buy a stock anywhere near an earnings announcement. Earnings announcements often mark a sudden reversal in investor psychology, especially in a weak part of the economic cycle (bear market, high unemployment).

Technorati Tags: mistakes stock traders make, stock market, stock traders, stock trading