Some Key Rules When Trading the Markets

Some Key Rules When Trading the Markets

Some Key Rules When Trading the Markets

$DIA,  $SPY,  $QQQ,  $VXX

“The investor’s chief problem, and even his worst enemy, is likely to be himself.” – Benjamin Graham

Below is a list of the Key stock trading rules when the markets are trading at highs, they are not new. Successful investor use them daily,  the rules are the rules.

Follow them and succeed, don’t, and fail:

  1. Sell Losers Short, Let Winners Run: It seems like a simple thing to do but when it comes down to it the average investor sells their winners and keeps their losers hoping they will come back to even.
  2. Buy Low and Sell High: You haggle, negotiate and shop extensively for the best deals on cars and flat screen televisions. but people will pay any price for a stock because someone one tipped them. Insist on making investments when you are getting a “good deal” on it. If it isn’t – it isn’t, do not try and come up with an excuse to justify overpaying for an investment. Overpaying often ends in pain.
  3. This Time is Never Different: As much as emotions and psychological makeup want to always hope and pray for the best, this time is never different. History may not repeat exactly, but it always comes close.
  4. Be Patient: There is never a rush to make an investment and there is nothing wrong with sitting on cash until a good deal comes along. Being patient is not only a virtue, it is a good way to stay out of trouble.
  5. Tune Out the Noise: Any good investment is not/never dictated by day to day movements of the market which is merely nothing more than Noise. Do your homework, made a good investment at a good price and have confirmed your analysis to correct, then the day to day market actions will have little bearing on the longer-term success of the investment. The only thing achieved by watching the TV pundits is increasing stress, anxiety, worry and concern.
  6. Risk is Not Equal to Return: Taking risk in an investment or strategy is not equivalent to how much money you will make. It relates to the permanent loss of capital that will be incurred when wrong. Invest conservatively and grow your money over time with the least amount of risk possible.
  7. Be a Contrarian: The herd is generally right in the middle of a move up in the markets, but they are seldom right at major turning points. When everyone agrees on the direction of the market due to any given set of reasons, often something else happens. So,  in order to buy something cheap or sell something at the best price, you are generally buying when everyone is selling and selling when everyone is buying.

Those are the rules, they are simple and impossible for most people to follow. Follow them and you will succeed in your investment goals long term.

You will not outperform the markets on the way North, but you will not lose as much on the way South. It is easier to replace a lost opportunity in investing, it is impossible to replace lost capital.

As an investor, it is your job to step away from emotions and look objectively at the market around you.

The Big Q: Is the action dominated by fear or greed?

The Big A: Long-term returns will depend not only on the answer that question, but how risk is managed.

Tuesday, the US major stock market indexes finished at: DJIA-47.81 at 21136.23, NAS Comp -20.63 at 6275.04, S&P 500 -6.77 at 2429.33

Volume: Trade on the NYSE came in light again Tuesday, with 833.5-M/shares exchanged

  • NAS Comp +16.6% YTD
  • S&P 500 +8.5% YTD
  • DJIA +7.0% YTD
  • Russell 2000 +2.8% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.40) Bullish (0.27) Bullish (0.42) Very Bullish (0.51)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Bullish (0.30) Bullish (0.27) Bullish (0.29) Bullish (0.33)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Very Bullish (0.51) Bullish (0.40) Very Bullish (0.56) Very Bullish (0.58)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.32) Bearish (-0.39) Bearish (-0.27) Bearish (-0.29)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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