Tuesday, November 17, 2009


My boss is right, change is constant in the market. Even if you excel in technicals or fundamentals, you still have to know when to use either one or both. Exceptional knowledge of the markets is useless if you're always one step behind. There are raging bull and bear markets, and there are also periods of consolidation. If you want to earn a living from trading, then you'd have to notice these constant shifts in environment, and adapt quickly. And so, in order to prepare myself for the future, from now on, whenever I pick up some valuable lessons from my own experiences, my boss' tidbits of wisdom, and even my colleagues' stories, I'd write them down here.

So here goes:

Period: From the March 2009 bear market trough.

1. Keep out of the laggards. Your chances of making a quick profit are slim when you hold on to these crappy issues. Use the index as your guide to identify laggards and leaders.
2. Never do the revenge trade intraday unless there is a valid set-up. And even so, only buy a portion of your original size.
3. If your stock is not trending, do not anticipate the moving average bounce. Wait for the first uptick.
4. Look at the big picture first, and then enter using an intraday set-up.
5. Candle sticks are very important. When you think something is wrong, get out and just enter the next day if possible.
6. In overbought markets, do not load up in one issue overnight. The chances of experiencing a "Black Swan" - or something extremely unexpected - are very high. (i.e. placements, profit warnings)
7. Avoid buying stocks in the first 30 mins.
8. Large and fast intraday moves accompanied by strong volume are signals to sell a bit of your position. On the other hand, small, gradual moves are hold signals. The latter are more sustainable.

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