Let’s use a little common sense here with these bailouts and government actions.  No government is large enough or has enough money to make up for all the mistakes that banks, mortgage companies, and individuals who bought mortgages that could not be realistically be repaid.  The very thought that the government could help people pay their mortgages will bring that government to the edge of the cliff along side the people they are trying to rescue.  I am not interested in politics but this just makes no mathematical sense. 

The nice little pop we got in all stocks in the last hour which erased the earlier losses the indices were showing is likely going to be just that backing and filling action discussed the last few days.  It seems most logical that the market drifts lower when people realize that the government bailing out homeowners would likely not be affordable or be passed into law.  Then the details of that kind of plan and the bickering among various politicians and advisors that comes with it will likely splash cold water on the market and then there goes that last hour’s gains with even lower stock prices.  That is a very likely scenario, the same kind of pattern we have been seeing for months.

The technical indicators are supporting the idea of lower lows and again to repeat yesterday’s report, that November 21^st lows are probably going to be reached.  If the market indices reach that November 21^st low and is accelerating to the downside if it passes below and through that number, then we could likely get another very strong rebound that may last days to a couple of weeks that could give us more big profits similar to what we saw in the banks last Thursday and Friday.  (Look at BAC, JPM, WFC, and others in your daily charts).

Tomorrow is Friday and it is Russian Roulette to buy stocks to hold over the weekend and with intraday trading SO PROFITABLE right now, that is the area to focus on.  For those of you who have had a negative image of “day trading,” which is intraday trading or scalping, I would advise you to reconsider.  After profit potentials in may stocks like examples below in just ONE DAY, try to open your mind up to this very powerful technique.

Uncategorized online stock trading, stock market education

The stock market was down as much as 247 points on the Dow30 at the last hour and made a last hour comeback after a report of Obama considering making mortgage subsidies to homeowners.  A government plan to subsidize troubled homeowner’s mortgage payments helped the Dow30 rebound and erase almost all of those losses.  The NASDAQ Composite ended up 11.2 or .73%.  This shows the market is not totally lethargic and dead but has some buying power and willingness to buy on good news.

It is like a hospital patient who is semi-comatose but can be brought back to life by a defibrillator (heart zapper).  The Dow30 was close to a “dropping off point” to the November 21^st lows.  This isn’t just a psychological support line but probably a variety of triggers could occur from margin calls, more redemptions requests that caused a lot of October and November selling, and another cycle of retail investor’s fears.  But again I say, we can make the most money in any market when we let the group herd follow each other down a path and then we position ourselves to take advantage of that non-thinking behavior.

For those of you who have studied the Wizard Training Course (or are about to), that is the very underlying thesis of the Bullshorts technique and I’ve made millions on that one technique alone.  (Required statement:  These results are unique and profits are not guaranteed!)  So needless to say, I love group behavior.  As a group in large numbers, people are not very smart.  But for the prepared individual who is trained to recognize opportunities, the rewards are high.

So to quote myself….  “Money flows to those people who have had the best training, are the most prepared and have the most discipline and they take it from the people who have had the least amount of training, are the least prepared and have little discipline.” 

Cut and paste this to a new document, enlarge it and tape it to your door or your bathroom mirror.  Hopefully this motivates you to study this process of making money in the stock market more diligently and learn about yourself and observe the patterns that help or hurt your trading or investing decisions.

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January 30, 2009

One of the common mistakes for any investor or trader is to feel compelled to have to be in a stock position in order to satisfy the need to be having a chance to make money in stocks.  There are times when it is best to be out of the market or when the market is in a transition from just finishing a “harvest” to waiting until the market is in a high probability buying environment.  Today and yesterday is such a time.

The sectors that I follow from banking stocks to technology, ag-chemicals, oil & gas, housing, steel, food, retail and others are mostly in “no man’s land” where it isn’t a good time to get long or short because the odds are 50-50 at best.

Discipline yourself to wait until the market or a sector is ready to buy long (or short if that is your orientation).  Take the big money center banks WFC, Wells Fargo, or BAC-Bank of America, or USB-US Bancorp, JPM-JP Morgan the week before last.  I wrote in The Daily Stock Report the high probability set-ups in this sector.  We just finished taking profits in this sector the last few days and now we look for other opportunities that give us high probability of making money but I don’t see many yet.

How about the November 21,2008 bottom in the whole market, not just in one sector but in almost all sectors.  There is an example of an extremely high probability “set-up” to buy stocks long.  Well, you get the idea.  It is discipline and emotional control that keeps you from going into markets like yesterday and today where neither long or short ideas had high odds.

Take care and talk to you soon!

Mitch King

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I wanted to start off tonight’s report by explaining how I interpret all the talking heads on CNBC, financial columns on websites, articles, analysts and anyone else you follow. 

First of all, the financial anchor people on CNBC are for the most part, not going to be helpful for you to make more money in stocks.  CNBC has encouraged their anchors to go ahead and give their opinions for the sake of ratings.  Steve Liesman, the economist-reporter is worth listening to, especially good during the October-November crisis.  David Faber is interesting when it comes to reporting buy-outs, mergers and a few other stories like that.  But the tendency is for reporters to be overly dramatic, panicky when the market is going down and elated and relieved when the markets are going up.

That is not what you need make money.  You need to protect your state of mind to be uncluttered, calm and analytical.  Be ready to act when the technical signals and common sense tell you to act with a lesser regard toward fundamental analysis.

As far as Jim Cramer, he is a really smart guy with a great research staff but the ideas on Mad Money show where he pushes buttons and makes sounds are difficult to develop a useful strategy that you can work with day to day.  I realize the noises may be good for entertainment but you really shouldn’t be trying to get a stock idea without having a cohesive strategy that works day in and day out.  Cramer is most useful in his personal interviews on his website, thestreet.com, about a subject you may be researching.  He is more thoughtful and calm.

CNBC’s Fast Money show can be good but you can get information overload with 4-5 different people’s strategy and opinions.  Remember that you only have to make money with 1-2 ideas at a time to make large amounts of money.  You are not trying to be a mutual fund manager, hedge fund trader, or some super trader in your mind.  Your job is to be consistently profitable with 1 or 2 stock ideas a day—and they can be the same stocks you are working with for several days.  I find that I trade better when the television is totally turned off unless it is panic city like we saw in October and November where new events kept snowballing from day to day.

It is a similar analogy to reading magazines vs. reading a book.  Magazine articles are short and although some information is useful, it isn’t usually complete.  You can’t learn how to fly an airplane by reading a few magazine articles but if you make a study at a subject by approaching it as process of learning thoroughly.  And that isn’t going to be done by taking a few tidbits here and there from one anchor’s comments to an analysts (mostly worthless to us), to the next talking head.  By the way, analysts are paid salaried people who went and got their MBA somewhere.  They are not paid to be right about stocks.  We are paid to by the markets by having a sound process that works, good stock ideas and good execution (your personal performance).

Most people hear an idea on CNBC and go out and buy it without looking at it on a chart or applying some common sense to it.  And my last disrespectful comment is that most people are wrong at about the worst time when it comes to most anything related to markets whether it is real estate, stocks, foreign exchange trading, tulip bulb farming, whatever it is.  Why is there an all-time high of $7.89 trillion dollars in the US in money markets and banks?  It should be the opposite where most of it is in the stock markets on November 21, 2008 but people react with their emotions, not their brains.

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When people are just starting out investing or trading in the stock market and I see the same pattern in their thinking when I meet them at seminars, answer emails, or read their comments. People tend to be focused on learning the techniques or the one technique that will make them a million bucks. And that is important at first but in reality, it isn’t the trading techniques that will make them successful—it is the emotional control and discipline that is required shortly after learning the actual technique.

Take the top professional sport athletes of especially individual sports like tennis, golf, swimming and many others. You notice that the top 20 players can at anytime win the tournament? The 20^th ranked athlete can beat the #2 or 3 ranked person and sometimes the #1 person. Why do you think that is? You think it is their golf swing or technique in tennis or swimming? I don’t think so. I can visualize an old man saying “it is all in the mind” while pointing to his head. And it is true.

What kind of thoughts do you have when you trade? What are your expectations? What kind of emotional reactions do you have when you have a losing trade or set of trades or have a bad day? How do you view money? Does greed control you, are you a gambler, do you feel some sort of pressure to perform, do you need the money that you are trading or investing with to pay next month’s bills? These are all factors that influence the decisions you take with your trades. There is a lot more to this than technique.

I can teach you to be proficient at stock trading technically within a short period of time, perhaps within a couple of months. It is the emotional control that takes more time to learn. But if you can learn more about yourself before you open your first stock position, you will make much more money and have fewer mistakes early in your investing or trading career.

Mitch King, Founder
www.TradeStocksAmerica.com
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Investing, Stock Trading stock market education, stock market investing, Stock Trading

Thoughts from The Daily Stock PIcks Newsletter that I write.  I still think we are going to have a lot of opportunities both long and short with continued volatility.  Currently, this makes intraday and swing trades the highest probability for the most profit in stock trades.  If your desire is to not trade frequently and you are looking for stocks to buy and hold for several months, then it would be better to wait until we see a more obvious point at which stocks may rebound substantially for an extended period of time.  You may be waiting for some time though.  In the meantime, the short term strategies we have been using from intraday to swings and lately as long as 5 days, have been working for us.  I like the idea in this market of taking small bites as opposed to going for a home run.

Best odds only, be decisive, aggressive, mentally flexible, stay in position size, don’t overtrade and wait a little longer to buy and wait a little longer to sell.  You will find that will make you more money on your trades.

Mitch King, Founder

www.TradeStocksAmerica.com

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One of the things that I look at when I am trying to get an overall picture of the financial markets are technical indicators that give the sentiment of investors.  What kind of thoughts, as a group, do people have?  And it is very negative at this moment.

  To try to get a feel of the mood of stock market investors, mutual fund managers, or even day traders, you can look at University of Michigan Sentiment Survey that comes out each month, the volatility index (VIX), which can be used as a contrarian indicator (1) of a pending turn in the market direction, and a variety of other technical indicators that tell us what stock market investors have been doing with their stock positions.

I make the most money in the stock market when I identify individual stocks or sectors that stock market investors or stock traders are selling out of at an increasing rate until ideally, they panic.  (Panic doesn’t occur too often). I’ve said for years to people that you want to try to gauge the maximum point of enthusiasm in investors to sell your current stocks (or sell short) and the maximum point of despair in order to buy.

It takes a lot of discipline and courage to do this because it feels like you are going against the grain where nobody else agrees with you.  But to quote myself from a book I wrote in 1997, “You don’t make a lot of money doing the same thing everyone else is doing at the same time.” 

Here is a quote I just ran across last week that is supposedly from Warren Buffet ….. “Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”
        Warren Buffett

Just remember I said it first! (lol).

Mitch King, Founder
www.TradeStocksAmerica.com

Investing stock investing, stock market education, Stock Trading