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In a message dated 11/9/99 11:20:37 AM Eastern Standard Time,
jimwsherwood@xxxxxxxxx writes:
<< When to Buy and When to Sell
by Robert J. Rak
---------------------------------
Eureka! After years of writing weekly here at About.com I am finally going
to present to you the holy grail of trading. That is, when to buy and when to
sell!
Those are two sentences you will never hear me say, at least not with a
straight face. In fact, if you did, I recommend you hide your daughters and
tuck your wallets into a safe place because I would definitely be up to no
good.
Obviously there is no magic indicator or formula or holy oracle capable of
telling you when to get in and out of individual trades. But, there is a
sound methodology you can employ which can better your profitability.
Tops and Bottoms
Ideally anyone in their right mind would love to be able to buy bottoms and
sell tops. But it just doesn't happen. Not consistently at least. Not even
close.
In fact, it's truly remarkable how much more often traders can buy tops and
sell bottoms. Now that happens far more frequently.
But part of being a good trader involves the effort of buying bottoms and
selling tops. A safe, solid methodology involves buying on pullbacks (or
buying bottoms) and selling into rallies (or selling tops).
Buying Pullbacks
The idea of buying a pullback is one of buying when you can, not when you
have to. If you are buying while most others are selling you will then have a
position established when the decline ceases and a rally ensues. Buying a
pullback applies both to long entries as well as short exits.
As per my Trader's Commandments, I feel only strong stocks should be traded
to the long side. So, let's take a look at the intraday chart of a strong
stock:
Don't be confused into thinking this is only a strategy for intraday
trading. The time frame of the trader/investor is irrelevant. The intraday
chart above could be a daily, even weekly chart and the lesson would be the
same.
Selling Rallies
Again, you want to sell when you can, not when you have to. Whether you are
selling out of a long or initiating a short is not relevant. But as far as
getting short goes, let's look at an intraday of a weak stock:
Easier Said than Done
Of course looking at these charts we are using hindsight, perhaps the only
perfect trading tool in existence. Unfortunately I haven't found a way to
incorporate it real time into my trading.
That said there are ways to get a feel for such tops and bottoms. For one,
following one or a small handful of stocks gets the trader 'in synch' with
how a stock trades.
Second, using some of the Information Traders Look At I wrote about.
Particularly:
The Tape: No better way to get acquainted with a stock than to watch it's
ticker. It's the best way to determine when a stock is basing.
Charts: A great way to apply the ideas of support and resistance.
Spoos: The charts above, if overlayed on a spoo chart, would have rallies
and pullbacks which closely tracked those in the futures on that day.
Bonds: While not so for AOL, JPM is definitely influenced by the bonds
and tracked them closer than it did the spoos.
Sectors: No surprise, at least not to me, the internets were strong on
this day and the financials were weak.
Reversals
This is in no way a perfect strategy. Some pullbacks don't stop. When a
stock reverses the rallies become shortable, not something to close longs
into.
But reversals aren't easy to spot. And that's OK. There is no such thing as
a 100% right trader, no matter what he tells you.
And again, some of the other tools I list will help in this regard. If the
spoos are up big on the day only to turnaround and head south chances are
good strong stocks will follow. They may not participate in the decline in
full force, but they will usually stop going up.
That's Not All
There's more to it than what I've written above. But this will get your feet
wet. In the following weeks I'll look at ways to enter and exit these trades
which complement what you've read.
Until then make a point of looking at lots of charts. Learn to spot strong
and weak stocks. Then notice how often such stocks will give you
opportunities to get in with pullbacks and rallies.
About.com Poll [input] [input] [input] Is buying pullbacks and selling
rallies a good way to trade?
[input] Definitely! It's a high reward, low risk strategy. [input] No way!
It works in hindsight, not in realtime. The only way to trade is to trade
breakouts. [input] It depends. It'll be right for some, wrong for others.
[input]
&PID=">Current ResultsWhen you're done reading, please visit the boards.
Share your thoughts about the feature with us. Add something you feel was
left out. Address something you feel I presented in a biased nature. Whatever
the reason, please do participate and speak up.
The topic is up and waiting for you, this one titled "when to buy and when
to sell". Or create a new topic.
>>
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Date: Tue, 9 Nov 1999 08:21:12 -0800 (PST)
From: Jim Sherwood <jimwsherwood@xxxxxxxxx>
To: traders2000@xxxxxxxxxxx
MIME-Version: 1.0
Subject: $[traders2000]$ When to Buy and When to Sell
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---------------------------------
When to Buy and When to Sell
by Robert J. Rak
---------------------------------
Eureka! After years of writing weekly here at About.com I am finally going to present to you the holy grail of trading. That is, when to buy and when to sell!
Those are two sentences you will never hear me say, at least not with a straight face. In fact, if you did, I recommend you hide your daughters and tuck your wallets into a safe place because I would definitely be up to no good.
Obviously there is no magic indicator or formula or holy oracle capable of telling you when to get in and out of individual trades. But, there is a sound methodology you can employ which can better your profitability.
Tops and Bottoms
Ideally anyone in their right mind would love to be able to buy bottoms and sell tops. But it just doesn't happen. Not consistently at least. Not even close.
In fact, it's truly remarkable how much more often traders can buy tops and sell bottoms. Now that happens far more frequently.
But part of being a good trader involves the effort of buying bottoms and selling tops. A safe, solid methodology involves buying on pullbacks (or buying bottoms) and selling into rallies (or selling tops).
Buying Pullbacks
The idea of buying a pullback is one of buying when you can, not when you have to. If you are buying while most others are selling you will then have a position established when the decline ceases and a rally ensues. Buying a pullback applies both to long entries as well as short exits.
As per my Trader's Commandments, I feel only strong stocks should be traded to the long side. So, let's take a look at the intraday chart of a strong stock:
Don't be confused into thinking this is only a strategy for intraday trading. The time frame of the trader/investor is irrelevant. The intraday chart above could be a daily, even weekly chart and the lesson would be the same.
Selling Rallies
Again, you want to sell when you can, not when you have to. Whether you are selling out of a long or initiating a short is not relevant. But as far as getting short goes, let's look at an intraday of a weak stock:
Easier Said than Done
Of course looking at these charts we are using hindsight, perhaps the only perfect trading tool in existence. Unfortunately I haven't found a way to incorporate it real time into my trading.
That said there are ways to get a feel for such tops and bottoms. For one, following one or a small handful of stocks gets the trader 'in synch' with how a stock trades.
Second, using some of the Information Traders Look At I wrote about. Particularly:
The Tape: No better way to get acquainted with a stock than to watch it's ticker. It's the best way to determine when a stock is basing.
Charts: A great way to apply the ideas of support and resistance.
Spoos: The charts above, if overlayed on a spoo chart, would have rallies and pullbacks which closely tracked those in the futures on that day.
Bonds: While not so for AOL, JPM is definitely influenced by the bonds and tracked them closer than it did the spoos.
Sectors: No surprise, at least not to me, the internets were strong on this day and the financials were weak.
Reversals
This is in no way a perfect strategy. Some pullbacks don't stop. When a stock reverses the rallies become shortable, not something to close longs into.
But reversals aren't easy to spot. And that's OK. There is no such thing as a 100% right trader, no matter what he tells you.
And again, some of the other tools I list will help in this regard. If the spoos are up big on the day only to turnaround and head south chances are good strong stocks will follow. They may not participate in the decline in full force, but they will usually stop going up.
That's Not All
There's more to it than what I've written above. But this will get your feet wet. In the following weeks I'll look at ways to enter and exit these trades which complement what you've read.
Until then make a point of looking at lots of charts. Learn to spot strong and weak stocks. Then notice how often such stocks will give you opportunities to get in with pullbacks and rallies.
About.com Poll [input] [input] [input] Is buying pullbacks and selling rallies a good way to trade?
[input] Definitely! It's a high reward, low risk strategy. [input] No way! It works in hindsight, not in realtime. The only way to trade is to trade breakouts. [input] It depends. It'll be right for some, wrong for others.
[input]
&PID=">Current ResultsWhen you're done reading, please visit the boards. Share your thoughts about the feature with us. Add something you feel was left out. Address something you feel I presented in a biased nature. Whatever the reason, please do participate and speak up.
The topic is up and waiting for you, this one titled "when to buy and when to sell". Or create a new topic.
---------------------------------
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