Introduction and how i do things

“It does not matter if you win or lose, it matters how you play the game.” If this quote can be applied to anything, it's stock trading. I have been trading the market off and on for about seven years now. The most important thing that I have learned in these seven years is that you can’t be right all the time. A loss is a loss and taking a loss personal is equivalent to not forgiving yourself for lacking the ability to predict the future with invariable precision. Another important lesson that I have learned is the ability to exercise patience. Placing a trade prematurely and impulsively will cost you big in the long run. There are a few different styles of investing. My investment style is considered to be short term compared to the traditional long term investing style. I am usually in and out within three to six months, catching smaller price swings in the market. I trade Stock options and not individual stocks, so money is amplified tenfold. Stock options are a double edge sword and can break your bank twice as fast as it can build it. I play both sides of the market and the greatest advantage to playing both sides of the market is it doesn’t matter if the market goes up or down you can still make money. The greatest set back is when analyzing charts and the data, signals can get crossed because you are looking for up and down signals. I have a few tools I use when I play the market, and below are a brief explanation of what they are and how I use them.

1.       Economic Data is a basically data that is gathered on a monthly or weekly basis and is released to the public. This data provides an overall picture to the current health of our economy. Economic data is important and drives the market the majority of the time. Some of the data includes unemployment rate, home sales, auto sales, consumer spending and so on.

2.       Technical analysis is technically the study of stock charts and price movement. On another level technical analysis is actually the study of human behavior. Price movement is actually the emotional reaction of the public from released economic data. Humans are creature of habit and habits are hard to break. Stock charts show many patters of behavior and some patterns go on for years, sometimes even decades. I use these formation of patterns when I play the market.

3.       Risk is a how much you expose yourself to loss. There a hundreds of risk profiles and financial models built on this stuff. Some of them are extremely complicated using all types of mathematical models and crazy statistical calculations that only few people in this world can understand. Personally I like to keep my risk profile simple.

Putting it all together I begin to look at the status of the current economy by review some of the currently released economic data (Anyone can view this stuff at Bloomberg.com). I try to get a feel for the economy along with what sectors are outperforming or under performing the majority of the market. Then I start to review stock charts looking for patterns that are concurrent with my opinion formed from the economic data. Once a favorable chart is found and I am confident that entering a position will be profitable, I do a quick analysis of where I think the price will move and calculate my risk on that movement. Ex. If I feel the stock will move $4 then ill risk $2 on that movement. This will give me a risk profile of 2:1 saying ill risk $2 dollars to make $4. If the stock drops more than two dollars then I exit the trade and look for another position to take. If the stock increases $4 dollars then I take my profit.