From time to time I will post educational material that in my opinion can benefit myself and others.  This may include simple "one liners", comprehensive trading strategy learned through my success or failures, through others, or links to good reads.

When I first started trading everything seemed like it was going to be easy money.  I didn't even know how to read a chart, understand price action, what fundamentals were or anything.  Over the course of the first year i naturally lost money; taking wild chances on stocks i would hear about on CNBC or Fast Money.  I did have a little bit of a head start on the research end of things - fundamentally speaking; as i do have a degree in business.  But the things i needed to learn were only going to come through experience and failure.  No better way to learn things than to have your head handed to you.
There are so many resources out there for traders that it makes my head spin.  Finding a few good ones are the key.  Eventually i ended up with one stock chart site (aside of my trading platform), two company research sites, and a couple other general information sites.  From those sites i can find pertinent links to other information that i need.

Some of the things i consider of upmost importance:

  • the first and one thing that means the most is DISCIPLINE.  It is far, deep, and wide in everything trading related; and plays a fundamental role in everything else i consider important.
  • OVERTRADING.  If you sit and stare at your stocks for long periods of time during market hours you will eventually fall victim to making decisions you shouldn't with trades.  I can't count the number of times i got shook out of a trade by looking at it too much.  Boredom, lack of movement (or moving the wrong way), not being confident in what i owned, finding something more interesting; the list goes on.
  • PATIENCE.  When i think about all the trades that would have been fantastic winners only if i would have given them enough time to work, well, it makes me sick.  The other thing that comes to mind when i think of patience is LETTING THE TRADE COME TO YOU.  It is very clear to a seasoned trader how powerful this is.  Having the patience to wait for a stock to come at the price you really want to own it at is the key.  That may mean waiting longer than you anticipate, missing a move in the stock and possibly not getting the better opportunity at all.  But most traders will agree that over time the stocks they want to own get to the price they want to own them at.
  • LACK OF TRADING PLAN.  When you buy a stock you need to know what you plan to do with it.  When i first started i would buy a shares of a company i liked; maybe i knew some about them, but didn't have a plan as to when to buy it, how long i intended to hold it, or what i would do if things didn't work out the way i planned.  Now i need to be confident in what to do in each of those situations.  Whenever you buy a stock, you should be able to defend your reasoning for owning it.  Always ask yourself why you intend to make a trade before you do.  Take the guesswork out of your trading a believe strongly enough about the trade and hold yourself accountable for your defense.  Not following a trading plan leads to all kinds of mistakes; one may try to chase the notion of a quick profit, bottom fish, try to find a stock to be in, - which are classic cases of not adhering to a plan.  Which leads to the next topic; EMOTION
  • It is largely thought the market is a reflection of human psychology.  EMOTION is what separates good traders from not so good traders.   We are forced to keep ourselves and our emotions in check so often and at such intense levels trading the market, its no wonder it plays the most powerful role in success.
  • SUPPORT AND RESISTANCE  also know as price levels.  Without understanding how support and resistance works in price action, you are lost.  It took me about a year of watching charts to finally give in to the fact that there was a LOT of power there.  When you look at a chart of just about any stock or index you will see levels, but HOW WELL do you see them?  There is more to this than most imagine.  I could write pages on this subject alone, but for now, just open your mind to the possibility that support and resistance levels have more meaning than you think.  Support and resistance are like a magnet for price action.  It represents the levels where price activity occurs over time repeatedly in the form of upper and lower ranges.  The more trading that occurs at a certain level, when the price moves higher, the upper range of the previous level tends to act as support.  When price falls below a high level of activity, and then moves up again, the lower level of the active range tends to act as resistance.  Think of it this way; from the last example, when the price moves back up to an area of high activity, there are a lot of stock holders who purchased there; and consequently would like to get their money back.  Look at charts and discover the levels of activity on the charts.  Learn to recognize how the stock reacts to the different levels.  There is enough consistency in this reality that you should (and need) to be able to identify support and resistance levels.  It is so powerful in price action that you can see it at work on a chart going back 5 years, 10 years, 1 month, 30 minutes, and even by the minute!  See for yourself.  Consider it one of you goals in understanding the stock you trade, and it will change the way you evaluate trading in a powerfully positive way.
     Always remember the market is always right; no matter what we may think, predict or otherwise.  Technical analysis is powerful, but remember when it comes to price action always make the observations and then lay out the possible scenarios which may occur based on historical price action.  The longer you have watched scenarios play out, the better you are prepared to handle the different situations involving risk.  When novice traders start out, many think the discovery process / choosing a stock entails most of their trade.  Then as they get hurt in their stocks they realize that WHEN they buy the stock - along with the picking of the stock - comprise a successful trade.  Then after finding those two elements aren't enough to be successful - if they survive this stage, they discover that RISK MANAGEMENT is as important as anything else they have learned.  The ones that survive past these stages and become successful are those who find their niche in trading.  They learn to get a grasp on their ability to be disciplined in many areas of trading such as being patient to let their trading plan take its course without overacting to social "noise", micro managing their stocks, or  jumping overboard from a trading plan and searching for a get rich trade out of desperation.
If you are not sure as to what your niche is yet, it would be best for you to look closer at the trading you do and define it.
Shortly i am going to post "The anatomy of a trade" and break down a trade from the very beginning; going through all the "whys" and possible scenarios and what my plans were.

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