Beware Of Relying on Stock Technicals Alone

Good morning all,

Today I wanted to write a little about the dangers of relying on the technical aspects of stocks alone. 

While technical analysis is a wonderful tool in determining the strength of a stock, it is not the end all to cure all in finding stocks to invest in. 

Technical evaluations can have many hidden traps that pump and dump promoters place in there in an attempt to "dress" up whichever stock they are going to promote. Looking at price increases or decreases very rarely very accurate. Just because a stock finished the day at plus or minus a certain percentage doesnt mean it actually moved very well at all. To be clearer I have to actually look at the individual trades themselves and see the amounts that were bought or sold. Have you ever seen a big jump in a  penny or sub penny stock and then looked and saw that it was a 50 share buy? That all to often is a promoters attempt to lure you into a stock on price alone. They manipulate the price with little buys thinking you wont notice that it was a crapola buy because they totally think you are stupid. A 100% gain on a stock is not really a gain if it only had 1,000 shares in volume.  I say dig DEEPER. 

Pay attention to the time and sales as promoters will manipulate the stock at 4 common times. The first is at the close the day before a promotion begins. They will often try to manipulate the stock down so as to get what they dress up and call a "bounce" first thing in the morning. The second is first thing in the morning in order to try to get the stock to move so they can proclaim its gaining momentum therefore luring you into their trap while at the same time making themselves look good. Third is once the stock stalls and we should all know by now that stocks stall. They will put in little buys in order to try to attract attention to the stock  through percentage gains again creating another trap. The Fourth and in my book the most pathetic is the end of the day manipulation to save face because the promotion bombed. They will try to get an end of day percentage gain so that they can tout their followers with a look at what our "call" did today, It gained blah blah blah percentage. 

Technicals can totally help you avoid these situations if you dig deeper underneath the dressed up surface, and also check to see if a particular stock has been promoted recently and what the outcome of that promotion was.  

Until tomorrow, 

Ride Hard or Stay Home 

Paper trading and Getting out on a Friday.......

I mentioned paper trading and how it can help hone your trading skills in earlier entries, but today I wanted to  elaborate a little more on paper trading..  The number one thing paper trading does for me is gives me experience in trading without the pressure of using actual money. This gives me the ultimate environment to trade in, emotionally free. Often when we are trading with our money we get caught up in our want and desire to make money. This can cause us to make emotional and rash decisions and forget our game plan of limiting our losses or getting to a certain preset profit percentage on a stock. Fridays tend to be very erratic and unpredictable as other traders sell off to take either profits or losses for the week. Remember I usually dont hold a position through a weekend unless I know for sure a position I am holding is long term. I tend to like to try to sell by the end of day Thursday so as to avoid the mess that Fridays can become. If for some reason I am unable to sell on Thursday I will use the first hour of trading Friday and the increase in volume to move my stock. Make sense?  The more a stock moves the easier it is to buy or in this case sell it and start looking for my next ride. Setting stop losses allow me to limit the amount I lose and setting a specific profit percentage in my mind allows me to grow my money consistently rather than erratically. Give me 30% profit on my money on every trade and I will run all the way to the bank smiling my best smile. In conclusion I want to again say keep the emotions OUT of your trading and you will become a much better and more consistent trader and hopefully richer than if you trade on emotion. This weekend Ill be writing about the ways I read news on companies leading into next weeks topic...... In depth Due Diligence.