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What Should I Trade? -- By: Bill Kraft
Copyright 2009, Makin' Hay, Inc., All Rights Reserved
Bill Kraft
Editor |
The question I am most frequently asked is: how do I find
candidates to trade? There are numerous considerations that can be
taken into account, but as I am constantly writing and preaching, the
first consideration is the traders individual plan and trading
personality. What might be a great candidate for me might be a terrible
choice for you and vice versa. In this article, I'll try to offer some
suggestions that could help a trader decide on what approach an
individual trader might prefer in seeking candidates. In looking at
some of the possibilities, I think it is important to understand that
almost any choice involves a compromise of one sort or another.
Though not usually the first choice of many newer traders and
investors, one of the first candidates to consider is to trade a whole
market. ETFs (Exchange Traded Funds) are available that permit
investments in whole markets like the Dow 30 (DIA) or the S&P 500 (SPY)
or the Nasdaq 100 (QQQQ). In general it is somewhat easier to trade a
whole market than it is to trade an individual stock because the whole
market is not subject to quite the same risks as the individual stock.
The price of a single stock, for example, could be dramatically
influenced by news that a competitor is introducing a new product, or by
news of an SEC investigation, or by postponement of an earnings
announcement, or by the arrest of a corporate officer, or by the
announcement of the acquisition of a big new customer, etc. While
events like those may have a huge influence on the price of the
individual stock, it likely would have a much lesser influence on the
market as a whole. In essence what I am saying is that one could expect
less volatility in a market than in an individual stock under many
circumstances. As a corollary, under most conditions, it is probably
somewhat easier (not necessarily easy) to follow market direction than
individual stock direction for many of the same reasons. On the flip
side, movement may not be as fast or far in whole market trades as in
individual stocks and, of course, that can be good or bad depending upon
one's position.
If the trader is seeking a little more movement, a little more
volatility yet wants to avoid single stock risk, another alternative is
to trade sectors. Again, sectors can be traded using ETFs that
essentially are baskets of stocks. The investor can choose an ETF for
any given sector and essentially own an interest in all or a chosen
group of stocks in a given sector. Much has been written about a
phenomenon known as sector rotation. Basically the theory suggests that
money flows from sector to sector with some gaining favor while others
may be losing support. As an example, as of the time I am writing this
article, over the past month a couple of the hottest sectors have been
Information Technology and Hotel/Motel REITS (real estate investment
trusts) while some of the less favored were Residential Construction and
Health Care Plans. Seeing that, a trader could choose to make a bearish
play on the Residential Construction sector or a bullish play on
Information Technology until he or she saw a change in momentum. Once
again, at least some of the risk of individual stock ownership is
removed though certainly less so than if the trader was in a "whole
market" ETF. In many cases, volatility or price movement could be
expected to be somewhere between that of individual issues and whole
market ETFs.
Of course, the trader can choose to trade individual stocks as many
do. Movement in them may well be farther and faster than in whole
market or sectors and that can be a good or a bad thing depending upon
the position taken.
Issues of risk control and monitoring are critically important no
matter what the investor chooses to trade. In a DVD entitled "Trading for Keeps" that I was invited to do in Chicago, I cover a number of
issues related to those subjects including some important principles of
disciplined trading, trend line and stop loss use, and protecting
positions and portfolios. You can purchase a copy by following the link
in this paragraph.
Good Trading!
Bill Kraft
Success Trading Group -- by Success Trading Team
Our Success Trading service delivers quality trading ideas for the elite investor that has the financial wherewithal and market nimbleness to profit on small moves in a stock's price. Become a member and you will be provided with email and/or PDA alerts intended to provide you with the opportunity to make many, many profitable trades.
Here is a play from the Success Trading Group:
NSTAR (NST)
Our Success Trading Group members closed a winning trade on NSTAR (Ticker: NST) this week when we traded in and out of NST the same day. We have several stocks on our radar and are looking forward to trading next week.
Have a great weekend and we'll trade next week.
Success Trading Group Team
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Option Trader -- by Bill Kraft
Our Option Trading Service is for conservative traders that understand leverage principles and enjoy the challenge of options trading. We focus on powerful option trading strategies that place volatility and momentum in your favor. And we pride ourselves on always minimizing our losses!
The Option Trader service utilizes standard trading in Puts and Calls as well as strategies using Leaps, Straddles, Credit Spreads, Calendar Spreads, and Naked Puts. But no matter how sophisticated a strategy may be, we ALWAYS know our downside potential on every trade.
Here's a look at a trade Bill is currently working on:
Boeing Co. (BA)
After a run-up from the July low, BA appears to have
completed a recent, probably healthy, retracement. The stock offers some
significant upside possibilities as it bounces up off a trend line. I am
looking at some in the money LEAPS calls as a way to try to profit from
a continuation of the upward move. It needs to break a little barrier in
the $56 range, but if it can do that, I see a target around $68.
Good Trading!
Bill Kraft
Editor of $10 Trader, Option Trader and Trend Trader
"Trade Your Way to Wealth" by Bill Kraft is an Amazon.com best seller!
"Smart Investors Money Machine" is Bill Kraft's most recent publication.
"Trading for Keeps: Making Money with Low Risk Option Trades" a trading DVD by Bill Kraft
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Trend Trader -- by Bill Kraft
Trend trading as we try to practice it is a form of momentum trading. We prefer to try to capture profit out of the middle of the trend rather than try to catch reversal at bottoms and tops.
Here's a look at a trade Bill is currently working on:
Zumiez, Inc. (ZUMZ)
ZUMZ is one of two trades closed by Trend Trader this week
giving an 85% percentage of winning trades closed so far in 2009. In the
ZUMZ trade, Trend Trader realized a 4.6% return before a small
commission in a one day trade. The other closed winner, by the way, was
Safeway (SWY) which realized a before commission gain of 3.5% in just 18
days. ZUMZ retreated shortly after the Trend Trader exit and looks as
though it might present a re-entry opportunity shortly.
Good Trading!
Bill Kraft
Editor of $10 Trader, Option Trader and Trend Trader
"Trade Your Way to Wealth" by Bill Kraft is an Amazon.com best seller!
"Smart Investors Money Machine" is Bill Kraft's most recent publication.
"Trading for Keeps: Making Money with Low Risk Option Trades" a trading DVD by Bill Kraft
Try our Trend Trader Real-Time Alert Service
and Get $50 off our Normal Website Rate!
$10 Trader -- by Bill Kraft
We really enjoy trading stocks that are $10 and under. Often they provide the chance to enjoy high percentage gains and, of course, at worst, the risk is limited to what we paid for the stock.
Here's a look at a trade Bill is currently working on:
Enzo Biochem Inc. (ENZ)
In closing a profitable trade in ENZ this week, $10 Trader
has shown a winning percentage of 77% for trades closed so far in 2009.
The ENZ trade opened on Wednesday and closed on Thursday for a before
commission gain of 6.3%. Earnings will be announced shortly on ENZ and I
expect to await those results before deciding whether to hop back aboard
ENZ. It does offer the possibility of a re-entry on a break above the
recent double top resistance, but until I see earnings I'll pass for a
while.
Good Trading!
Bill Kraft
Editor of $10 Trader, Option Trader and Trend Trader
"Trade Your Way to Wealth" by Bill Kraft is an Amazon.com best seller!
"Smart Investors Money Machine" is Bill Kraft's most recent publication.
"Trading for Keeps: Making Money with Low Risk Option Trades" a trading DVD by Bill Kraft
Try our Under $10 Trader Real-Time Alert Service!
Dividend Trader -- by Dividend Trader Team
Our Dividend Trader service focuses solely on the "best of the best" dividend paying stocks. We trade these stocks for short-term gains and we will also buy these stocks for their powerful dividend producing income with a purpose to make capital gains as the stock increases in value.
With these trades we attempt to get in and get out quickly. Once we buy, we immediately set an exit point of 3% above the buy price. We have had great success in the past. In fact, we have put together a string of 61 positions in a row that have hit our 3% target subsequent to the buy alert!
While we titled this service a "trader" service, we also invest in these dividend-paying stocks from time to time for the long-term. We will buy these stocks for their powerful dividend producing income with a purpose to make capital gains as the stock increases in value.
Many of the stocks that we will be "investing" in have had a history of raising their dividends almost every year. Year after year. This can be powerful. Building up your dividend income in a tax deferred account such as an IRA can siginficantly boost your account over the years.
Feel free to sign-up for a free 30-day trial. During such time you can review our Trade Tables and see the type of stocks we are buying. You will also receive in real-time all the new trading and investing alerts we send during your trial period!
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