Tag Archives: sidelines

Gold Bugs: Two Ways Not To Let The Dollar Punch You In The Face

Throughout the course of an average trading week, you're probably faced with 5 to 10 different things that make you say, "Man, if I knew that was going to happen I would have exited that stock."

If you are still in gold or gold mining stocks, then the dollar laid a hard one right on your face.

So what should you do from here?

Two things: sell and sit on the sidelines.

In the video below, I will show you some of the things I outlined in a previous video that have come to pass. While the longer-term trend for the dollar index continues to be negative, I explain why you should be sitting on the sidelines.

The Black Art Of Trend Trading

Trend trading is about holding your positions for a long time, perhaps even for several months. To trend trade, you need to hold your position while the stock reacts against the main trend.

Now no one is going to mail you an invitation to join the party when the stock takes off. When a trend first pops its head up above the wall, few people pay attention. Professional traders constantly monitor and screen their markets looking for breakouts and positive divergences.

Markets at extreme lows or highs only then attract journalists and end up in the news.

A big difference between the pros and the amateurs is that the pros always screen and track their markets while the amateurs only "wake up" to a stock after it hits the news. By that time, the party train has already left the station.

A new breakout is easy to recognize but hard to trade and even harder to hold. As a trend speeds up, the more people on the sidelines hope for a pullback so that they can enter. The stronger the trend, the less likely it is to attract bargain hunters. It takes a lot of patience and confidence to hold a position in a trend. This is one of the reasons women tend to trend trade better than men, they are more likely to be patient.

Your goal as a trend trader is to position yourself in the direction of the market tide and use the smaller waves that go against that tide to add to your initial position.

If you are a beginner, learn to trend trade a single small position. Hold some of your money back and add to your position on pullbacks.

Once you see a new trend, get in! New trends, popping out of trading ranges, are very fast, with few or no pullbacks. If you think you have identified a new trend, jump aboard. You can always reduce your risk by trading a smaller size, but do not wait for a deep pullback. Those pullbacks or retracements will come later at which time you can add to your position. Jumping aboard a new trend feels risky and counter-intuitive. As the great George Soros said, “Buy first, investigate later.”

Place your initial stop just under the breakout level where the new trend busted out of the trading range. If your profit thesis was correct, that this is a new trend, the stock should not fall back into the trading range.

Wait for a retracement. If the breakout of the trading range holds, the stock will take the next leg up. Move your stop up just below the retracement low.

Stay with the trend until your trailing stop is broke. Amateurs often sell out of trends much too early because they try and pick the end of a trend—a nearly impossible task. As Peter Lynch said, "Trying to catch a bottom is like trying to catch a falling knife—you invariably grab it in the wrong spot."

Revenge Trading: Settle the Score With Moving Averages

So you just played the greatest fool by chasing a stock higher. Right after you bought, the stock took a dive and you stopped out for a 12% loss.

You knew you shouldn't have chased the stock.

But how did other traders out trade you? What were THEY looking at that YOU weren't that told them to sell and take profits?

Too many traders forget about the EMA because of the many flashy technical indicators now at their finger tips. Yet trading the moving average is one of the oldest and most accurate ways to trade.

The most important message of a moving average is the direction of its slope. When the EMA rises, it shows that the crowd is becoming more optimistic and bullish, which is a good time to be long. When it falls, it shows that the crowd is becoming more pessimistic and bearish. It is a good time to be short.

When a moving average points up, go long. When a moving average points down, go short. As a trader, you have three options: go long, go short, or move to the sidelines.

When a moving average turns up, don't short. When a moving average turns down, don't go long.

When an EMA starts jerking up and down, it's a trendless market so move to the sidelines.

Enter a long position near the rising MA. Enter a short position near the falling MA.

How do you not become the greatest fool by chasing a stock higher right before it reverses?

Most uptrends have retracements. When a stock retraces to the EMA, buy. Place a stop slightly below the EMA. If the rally resumes, you will make money. If the market turns against you, the loss will be small.

Buying near the EMA will help super charge your gain while minimizing your risk.

I hope this article helps you make a lot of money. Leave any comments you might have below. Thank you and happy improved trading.

Lance Jepsen
President, GuerillaStockTrading.com
Your Trading Coach
(because everyone, even Tiger Woods, needs a coach)

Move To The Sidelines For the S&P 500, Nasdaq, and Dow

It's time to stop trading and move to the sidelines.

Knowing WHEN to trade is just as important as knowing WHAT to trade. All the major indices have dropped into a trading range and until we know which group, the bulls or the bears, has control, it's best to sit on the sidelines.

As a review our goal is to wait for one group to emerge as dominant then place our bets on that group.

In the video below, I examine the S&P 500 falling to a fresh two-week low, and the big question is this a correction, or the start of a major trend on the downside?

Enjoy and leave any comments you might have below.

New Traders Sideline Mystery

Knowing WHEN to trade is just as important as knowing what or how to trade.

Weekly indicators like the MACD take priority over daily indicators. Determine the larger trend then trade with the trend.

On days a stock trades sideways, assume continuation of the previous trend.

If you are on the sidelines and thinking about taking an entry in a stock, determine if price stagnation is taking place. It is trading capital that pushes a market one way or another. An oversupply or imbalance of buy orders will push the market up. An oversupply of sell orders will push the market lower. When price stagnation is present (as typically happens many times throughout the trading session), the market and its participants are telling us that, at the present time, they are happy or satisfied with the prevailing bid and offer. You don't want to be in the market at these times. The market is not going anywhere. It is a waste of time, capital and emotional energy. It's much better to find a hot market to trade in.

Friday's are usually a bad day to day trade. Many professional day traders exit their positions on Friday as their boss doesn't want them to hold positions over the weekend news cycle. Friday's tend to be lower volume days. Price stagnation is more common on Friday's than on any day of the week.

Most newbie traders think there are two possible decisions for any given trade: buy or sell. There is a third position: sidelines. Your options are to buy, sell, or sit on the sidelines. Knowing when to sit on the sidelines is just as important as knowing when to buy or sell. If you are having trouble establishing the trend within your optimal trading time frame, jump out one time frame. If you still can't determine the trend, sit on the sidelines until the trend becomes more apparent. If an earnings announcement is coming within the next day, it's usually best to sit on the sidelines until after the earnings announcement rather than to take a position a day or two before. Many newbie traders get blind-sided by earnings announcements, don't be on of them. If the Fed is going to take some key action that will impact the markets it's usually best to sit on the sidelines until after their action rather than trying to game their action.