Fibonacci Numbers and the Golden Ratio...

By Justin Kuepper (Investopedia.com)

There is a special RATIO that can be used to describe the proportions of everything from nature’s smallest building blocks, such as atoms, to the most advanced patterns in the universe, such as unimaginably large celestial bodies. Nature relies on this innate proportion to maintain balance, but the financial markets also seem to conform to this "golden ratio." Here we take a look at some technical analysis tools that have been developed to take advantage of it.

The Mathematics

Mathematicians, scientists, and naturalists have known this ratio for years. It’s derived from something known as the Fibonacci Number Sequence, named after its Italian founder, Leonardo Fibonacci (whose birth is assumed to be around 1175 AD and death around 1250 AD). Each term in this sequence is simply the sum of the two preceding terms : 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, etc.

But this sequence is not only what is important, it is the quotient of the adjacent terms that possesses an amazing proportion, roughly 1.618, or its inverse 0.618. This proportion is known by many names: the golden ratio, the golden mean, PHI, and the divine proportion, among others. So, why is this number so important? Well, almost everything has dimensional properties that adhere to the ratio of 1.618, so it seems to have a fundamental function for the building blocks of nature.

Prove It!

Don’t believe it? Take honeybees, for example. If you divide the female bees by the male bees in any given hive, you will get 1.618. Sunflowers, which have opposing spirals of seeds, have a 1.618 ratio between the diameters of each rotation. This same ratio can be seen in relationships between different components throughout nature.

Still don’t believe it? Need something that's easily measured? Try measuring from your shoulder to your fingertips, and then divide this number by the length from your elbow to your fingertips. Or try measuring from your head to your feet, and divide that by the length from your belly button to your feet. Are the results the same? Somewhere in the area of 1.618?

The golden ratio is seemingly unavoidable.

But that doesn’t mean that it works in finance does it? Actually, the markets have the very same mathematical base as these natural phenomena. Below we will examine some ways in which this ratio can be applied to finance.

The Fibonacci Studies and Finance

When used in technical analysis, the golden ratio is typically translated into three major percentages :
38.2%
50.0%
61.8%.

There are four primary methods for applying the Fibonacci Numbers and Ratios to finance : retracements, arcs, fans, and time zones.

1. Fibonacci Retracements

Fibonacci retracements use horizontal lines to indicate areas of support or resistance. They are calculated by first locating the high and low of the chart. Then five lines are drawn: the first at 100% (the high on the chart), the second at 61.8%, the third at 50.0%, the fourth at 38.2%, and the last one at 0.00% (the low on the chart). After a significant price movement up or down, the new support and resistance levels are often at or near these lines.

2. Fibonacci Arcs

Finding the high and low of a chart is the first step to composing Fibonacci arcs. Then, with a compass-like movement, three curved lines are drawn at 38.2%, 50.0%, and 61.8%, from the desired point. These lines anticipate the support and resistance levels, and areas of ranging.

3. Fibonacci Fans

Fibonacci fans are composed of diagonal lines. After the high and low of the chart is located, an invisible vertical line is drawn though the rightmost point. This invisible line is then divided into 38.2%, 50.0%, and 61.8%, and lines are drawn from the leftmost point through each of these points. These lines indicate areas of support and resistance.

4. Fibonacci Time Zones

Unlike the other Fibonacci methods, time zones are a series of vertical lines. They are composed by dividing a chart into segments with vertical lines spaced apart in increments that conform to the Fibonacci Number Sequence (1, 2, 3, 5, 8, 13, 21, 34, 55, 89, etc.). These lines indicate areas in which major price movement can be expected.

Conclusion

These Fibonacci studies are not intended to provide the primary indications for timing the entry and exit of a stock; however, they are useful for estimating areas of Support and Resistance. Many people use combinations of Fibonacci studies to obtain a more accurate forecast. For example, a trader may observe the intersecting points in a combination of the Fibonacci arcs and resistances. Many more use the Fibonacci studies in conjunction with other forms of technical analysis. For example, the Fibonacci studies are often used with Elliott Waves to predict the extent of the retracements after different waves. Hopefully you can find your own niche use for the Fibonacci studies, and add it to your set of investment tools!

The Golden Sequence : 1 2 3 5 8 13 21 34 55 89

The Golden Percentages : 38.2% 50.0% 61.8%

The Pyscho-Logical Percentages : 25% 33% 50% 66% 75%

The Micro Sequence/Penny Stocks : .01 .02 .03 .05 .08 .13 .21 .34 .55 .89

bought JUNE NOKIA CALL CONTRACT strike(12.5) $125 each

It was a good read. Thanks

CLYW TOMORROW IS THE DAY

PETCO UPSIDE DOWN HEAD AND SHOULDERS?

could be a great options swing trade right here

b4 May 20th

could be a great options swing trade right here

b4 May 20th

May 19th







going up? not for long US DOLLAR DAILY


how about the big picture? US DOLLAR WEEKLY CHART:

good read (imho) MASTERING REWARD/RISK


Most traders ignore reward/risk ratios, hoping that luck will save them when things start to go bad.

This is probably the main reason so many of them are destined to fail. It's really dumb when you think about it, because reward/risk is the easiest way to get a definable edge on the market house.

The reward/risk equation builds a safety net around your open positions. It's designed to tell you how much can be won, or lost, on each trade you take. The secondary purpose is to remove emotion so you can focus squarely on the cold, hard numbers.

Let's look at 15 ways that reward/risk will improve your trading performance.

1. Every setup carries a directional probability that reflects a specific pattern. Always execute positions in the highest-odds direction. Exit your trades when a price fails to respond according to your expectations.

2. Every setup has a price level that violates the pattern. Only take trades where price needs to move a short distance to hit this "risk target." Look the other way and find the "reward target" at the next support or resistance level. Trade positions with the highest reward target to risk target ratios.

3. Markets move in trend and countertrend waves. Many traders panic during countertrends and exit good positions out of fear. After every trend in your favor, decide how much you're willing to give back when things turn against you.

4. What you don't see will hurt you. Back up and look for past highs and lows your trade must pass through to get to the reward target. Each price level will present an obstacle that must be overcome.

5. Time impacts reward/risk as efficiently as price. Choose a holding period based on the distance from your entry to the reward target. Then use price and time for stop-loss management. Also use time to exit trades even when price stops haven't been hit.

6. Forgo marginal positions and wait for the best opportunities. Prepare to experience long periods of boredom between frantic surges of concentration. Expect to stand aside, wait and watch when the markets have nothing to offer.

7. Good setups come in various shades of gray. Analyze conflicting information and jump in when enough ducks line up in a row. Often the best thing to do is calculate how much you'll lose if you're wrong, and then take the trade.

8. Careful stock selection controls risk better than any stop-loss system. Realize that standing aside requires as much deliberation as an entry or an exit, and must be considered on every setup.

9. Every trader has a different risk tolerance. Follow your natural tendencies rather than chasing the crowd. If you can't sleep at night, you're trading over your head and need to cut your risk.

10. Never enter a position without knowing the exit. Trading is never a buy-and-hold exercise. Define your exit price in advance, and then stick to it when the stock gets there.

11. Information doesn't equal profit. Charts evolve slowly from one setup to the next. In between, they emit noise in which elements of risk and reward conflict with each other.

12. Don't be fooled by beginner's luck. Trading longevity requires strict self-discipline. It's easy to make money for short periods of time. The markets will take back every penny until you develop a sound risk-management plan.

13. Enter positions at low risk and exit them at high risk. This often parallels to buying at support and selling at resistance, but it can also be used to trade momentum with safety and precision.

14. Look to exit in wild times in order to increase your reward. Wait for price acceleration and feed your position into the hungry hands of other traders just as the price pushes into a high-risk zone.

15. Manage risk on both sides of the trade. Focus on optimizing entry and exit points and specialize in single, direct price waves. Remember that the execution of low-risk entries into bad positions allows more flexibility than high-risk entries into good positions.

http://hardrightedge.com/wheel/hrerisk.htm

MM Manipulation... interesting reading... hope this is not a repost...

http://www.imanet.org/ima/docs/1900/1832.pdf

Only hurts on mentally and on paper. Remember, the market is driven by fear and greed!

is this really even a trendline?

Only dead fish go with the flow!!!

Always do your own due diligence & Never invest more than you can afford to lose

"Capitalism is the unequal distribution of wealth;.....

socialism is the equal distribution of poverty."

Your best teacher is your last mistake.

"The difference between intelligence and stupidity is that

intelligence has its limits."

For the ladies - A MARKETING EXPLANATION

Several people have asked for an explanation of Marketing. Perhaps the following analogies will help clear it up:

You see a handsome guy at a party. You go up to him and say, "I'm fantastic in bed." -- That's Direct Marketing.

You're at a party with a bunch of friends and see a handsome guy. One of your friends goes up to him and pointing at you says, "She's fantastic in bed." -- That's Advertising.

You see a handsome guy at a party. You go up to him and get his telephone number. The next day you call and say, "Hi, I'm fantastic in bed." -- That's Telemarketing.

You're at a party and see a handsome guy. You get up and straighten your dress. You walk up to him and pour him a drink. You say, "May I?" and reach up to straighten his tie brushing your breast lightly against his arm, and then say, "By the way, I'm fantastic in bed." -- That's Public Relations.

You're at a party and see a handsome guy. He walks up to you and says, "I hear you're fantastic in bed." -- That's Brand Recognition.

You're at a party and see a handsome guy. You talk him into going home with your friend. -- That's a Sales Rep.

Your friend can't satisfy him so he calls you. -- That's Tech Support.

You're on your way to a party when you realize that there could be handsome men in all these houses you're passing. So you climb onto the roof of one situated toward the center and shout at the top of your lungs, "I'm fantastic in bed!" -- That's Spam

This is one of the sites that I use ...

it is a good place to start



http://daytrading.about.com/cs/ecns/l/bl_mmcodes.htm

Spoofing:

Stock market manipulation in which a trader with a position in a stock places an anonymous buy order for a large number of shares through an ECN and then cancels it seconds later. The price of the stock will immediately jump, giving the impression of high demand, which draws others into buying the stock, allowing the manipulator to sell at a higher price. Some market analysts believe this is one cause of increased volatility in the markets.

Painting the tape:

The illegal practice in which traders buy and sell a specific security among themselves, creating the illusion of high trading volume and significant investor interest, which can attract unsuspecting investors who might then buy the stock and enable the traders to profit.

http://www.investorwords.com

Thanks- good reminder- I'm posted it to my board.

FWIW, for a small start- I would recommend the Bowser Report's book- "making dollars out of pennies". It provides the basic F/A foundation for small caps. I also took a bit from the Motley Fool crowd for F/A.

On T/A- that is an animal in itself, imo. I use it more as I've found a niche that works for me most times. Each person seems to concentrate on certain areas- so you need to find what works for you.

Most of my thoughts/education is posted on the BTS board, if you want to take a gander.

Teapeebubbles- In your I-box, you mention no need to post small percentage gains. What % are you looking for when you enter a trade? I try to gain a 30% within a 6-month window.

"Buy Fear and Sell Euphoria"

Life is not measured by the number of breaths we take; but by the number of times our breath is taken away....

Bulls make money. Bears make money. Pigs and sheep go broke.

Teapeebubbles, I am fairly new to the market. In since Sept. 03. I have read all of your posts here, and have even saved some to be able to read again and again. Could you recommend books or other websites where I can learn more about fundamental, and technical analysis. Which do you prefer or use. Wouldn't fundamental be important to find a good company, and tech to pick a good point to buy the stock? I don't want to get into shorting, or options, just buying long for now, holding for at least 3, if not 5 years or more. Thanks in advance for your time and patience.

Worrying is like sitting in a rocking chair, it's something to do but it doesn't get you anywhere......

NASDAQ Halt Codes

Trading Halt Codes and Market Category Codes

http://www.nasdaqtrader.com/trader/tradingservices/marketwatch/TrdHaltCodes.stm



NASDAQ-100 Monthly Expirations S&P Daily Additions
The schedule of trading halt codes below identifies the reason for which trading in NASDAQ®/CQS securities is halted. When an issue resumes quoting, the code will change.

Listed below are the trading halt code identifiers and a description of what each represents:

Trade Halt Code Description

T.1 Halt - News Pending
Trading is halted pending the release of material news.
T.2
Halt - News Released
The news has begun the dissemination process through a Regulation FD compliant method(s).
T.3
Halt - Resumption Times
The news has been fully disseminated through a Regulation FD compliant method(s); or NASDAQ has determined either that system misuse or malfunction that caused extraordinary market activity will no longer have a material effect on the market for the security or that system misuse or malfunction is not the cause of the extraordinary market activity; or NASDAQ has determined the conditions which led to a halt in an Exchange-Traded Fund are no longer present. Two times will be displayed: (1) the time when market participants can enter quotations, followed by (2) the time the security will be released for trading. All trade halt and resumption times will be posted in HH:MM:SS format.
T.6
Halt – Extraordinary Market Activity
Trading is halted when extraordinary market activity in the security is occurring; NASDAQ determines that such extraordinary market activity is likely to have a material effect on the market for that security; and 1) NASDAQ believes that such extraordinary market activity is caused by the misuse or malfunction of an electronic quotation, communication, reporting or execution system operated by or linked to NASDAQ; or 2) after consultation with either a national securities exchange trading the security on an unlisted trading privileges basis or a non-NASDAQ NASD facility trading the security, NASDAQ believes such extraordinary market activity is caused by the misuse or malfunction of an electronic quotation, communication, reporting or execution system operated by or linked to such national securities exchange or non-NASDAQ NASD facility.
T.8
Halt – Exchange-Traded-Fund (ETF)
Trading is halted in an ETF due to the consideration of, among other factors: 1) the extent to which trading has ceased in the underlying security(s); 2) whether trading has been halted or suspended in the primary market(s) for any combination of underlying securities accounting for 20% or more of the applicable current index group value; 3) the presence of other unusual conditions or circumstances deemed to be detrimental to the maintenance of a fair and orderly market.
T.12
Halt - Additional Information Requested by NASDAQ
Trading is halted pending receipt of additional information requested by NASDAQ.
H.4
Halt - Non-compliance
Trading is halted due to the company's non-compliance with NASDAQ listing requirements.
H.9
Halt - Not Current
Trading is halted because the company is not current in its required filings.
H.10
Halt - SEC Trading Suspension
The Securities and Exchange Commission has suspended trading in this stock.
H.11
Halt - Regulatory Concern Trading is halted in conjunction with another exchange or market for regulatory reasons.
D
Security deletion from NASDAQ / CQS
Notes:
News Codes H.4 and H.9 will ordinarily be activated in situations where an SEC trading suspension is terminated and a NASDAQ trading halt is terminated, but the issuer in either instance is not in compliance with specific NASDAQ requirements in NASD rule 4120 and its interpretations. H.4 and H.9 codes indicate a qualifications halt, and quotations may not be displayed until the issuer meets NASDAQ requirements or is given a temporary exception.
Any questions related to a specific trading halt or to the trading halts codes should be directed to NASDAQ MarketWatch at 800.537.3929 or 301.978.8500 .


Market Category Code Description

N NASDAQ-Listed Security
C
Exchange-Listed Security







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In an untamed world, you lose the mind........
....In an untamed mind, you create the world.

The difference between genius and stupidity is genius has it's limitations, stupidity doesn't.

you know the news is real if the stock can stay near the highs of the day, then you know there is something cooking.

consider opening 2 new accounts with

Terra Nova & Cybertrader

between them you usually can find the short shares you want on those soon to panic dive bloat stocks

Matthew 16-26 Don't make money your idol.

YOU ONLY NEED MONEY TO BUY, BUT TALENT TO SELL.

The only reason for time is so that everything doesn't happen at once
--Albert Einstein
Insanity: doing the same thing over and over again and expecting different results.
--Albert Einstein
Once you can accept the universe as matter expanding into nothing that is something, wearing stripes with plaid comes easy.
--Albert Einstein

Is there a Betty Ford Clinic for Trader Dependency?

Monday was so incredibly good and holding such up stocks still, I can't sleep waiting for the mkts to open.....

so where is that 7-Step Trading Dependency Program? lol

I don't want to get to the end of my life and find that I lived just the length of it. I want to have lived the width of it as well

The top is always the point of furthest greed.

"The market is a place set apart where men may deceive each other."

Associate yourself with those of good quality if you esteem your own reputation: for it is better to be alone than in bad company.

Success is the result of good judgement....

Good judgement is the result of experience....

Experience is often the result of bad judgement

New theory with low floaters which seems to hold true:

Do NOT sell with less than 500k total volume showing if you see momo and volume coming in. Price will be higher at 500k, and probably even higher than that at 1mil.

As a matter of principle I insist that my posts stand on their own without any defense of myself nor discussion of any personal credentials or authority I might speak with.

It should be the force of the argument not the voice of the speaker that is determinative of the credibility of the point offered.

teabeebubbles brings you TONS of VALUABLE WISDOM
Learn it now or let the markets take your money...either way you'll learn.

---- H e r e y o u G O ! ! -------------------------

if you dont know how to read a chart dont trade. EDUCATE, EDUCATE, EDUCATE, read, read, read....

Leave the emotions at the door... the whole market is based upon giving confidence in bad stocks and scare you out of the good stocks you are holding.

Know your entry points and exit points (both up for gain and down for loss) Many newbies spend all their time trying to find out when to enter a stock and have no idea as to exit points.

NEVER MARRY A STOCK.... I set a loss ratio of 5 to 8 percent max... UNLESS I KNOW THE STOCK AND ITS HISTORY.... this does not include when a stock shakes....

Do not use money you NEED for other expenses. All money used for trading should be extra money not needed for anything else but trading....

There are alot of good traders around... Initially, I would track who is recommending what stock and at what price they are recommending it and track it on paper.. This will give you and Idea who to follow. Remember the stock market involves money, therefor you should have your guard up at all times.

In closing, a famous person once said the hardest part of becoming a millionare is holding on to it.... there is always someone trying to take it from me.


-----
if you dont know how to read a chart dont trade. EDUCATE, EDUCATE, EDUCATE, read, read, read....

Leave the emotions at the door... the whole market is based upon giving confidence in bad stocks and scare you out of the good stocks you are holding.

Know your entry points and exit points (both up for gain and down for loss) Many newbies spend all their time trying to find out when to enter a stock and have no idea as to exit points.

NEVER MARRY A STOCK.... I set a loss ratio of 5 to 8 percent max... UNLESS I KNOW THE STOCK AND ITS HISTORY.... this does not include when a stock shakes....

Do not use money you NEED for other expenses. All money used for trading should be extra money not needed for anything else but trading....

There are alot of good traders around... Initially, I would track who is recommending what stock and at what price they are recommending it and track it on paper.. This will give you and Idea who to follow. Remember the stock market involves money, therefor you should have your guard up at all times.

In closing, a famous person once said the hardest part of becoming a millionare is holding on to it.... there is always someone trying to take it from me.

--------
By saying "do paper trades", It means this:

Start doing your research, frequent traders boards who seem to have something to offer. Identify companies whose stock you might consider trading. Then research the heck out of those firms (I would recommend you stay away from penny stocks as others have recommended. Often there is little hard data on such companies and even more often what data is available is unreliable).

Then decide what you want to trade. Are you going to swing trade? Are you going to day trade? (Note: If you don't know what these terms mean, my following advice is even more important).

NOW .... execute your trades on paper. What this means is write them down on paper next to your computer. DO NOT log in to your online brokerage account. DO NOT call your broker. DO NOT actually purchase, sell, short, or option any stock. JUST WRITE IT DOWN ON A PIECE OF PAPER NEXT TO YOUR COMPUTER. Continue trading your selected stocks this way (on paper next to your computer), keeping track of what you are making (or losing) on each trade. See ... now you are learning! And you haven't lost a plug nickle yet, even though you are getting an education.

Continue doing this for as long as it takes. Believe me, you will start off losing money (on paper). Keep doing this until you start making money (on paper) and feel confident in what you are doing.

Now ... try the real deal. DO NOT risk a lot of $$ starting off. Only risk what you can afford to lose. If you do lose, go back to paper trading until you get better. You may end up only paper trading for months until you understand what you are doing. GOOD!! You don't want to risk real $$ until you REALLY understand what you are doing. Until then, leave your $$ in a savings account.

Otherwise, you may as well go to Vegas or flush your $$ down the toilet.


-----

If you're gonna play the pennies....

You 'MUST' consider the following!

Subject: 'Leverage' aka 'Money Management'

You must use percentage/leverage, if you do, it becomes your friend.

Let's say you bought 'XYZ' @ .02 and for whatever the reason, you're still holding all your initial and subsequent buys. You come home from work one day and find it closed @ .075.... that's over 300%.... "I think you're starting to fall in love?" if you don't sell some now! Don't get caught holding a bag because you read some faceless and nameless post that said 'It's going to .12".

The thing has already given you over 300%.... in order for it to give you 1 more 100% it must "DOUBLE!!!".... 'hello!'

You're overdue. Sell some of your little boy/girl friend and go to cash and start looking for another 'Lolla Lovely' or "Mr. Wonderful'.

The attributes your new love interest should have should be the following:

1) The PPS should be at least 200% lower than the PPS of the stock you sold.

2) It should meet the same criteria that made you buy 'XYZ'.

3) If you don't find it today......"THERE'S NO RUSH".......'that's why God made tomorrow!'

The more shares you have the more 'bang for the buck'.

"LEVERAGE is KEY"!!!!!
-----
some things i've learned and remind myself of:


-ALWAYS PROTECT YOUR ACCOUNT - don't put all your money on one issue, one halt and you are done...

-LOCK IN PROFITS - u can always let some ride free

-DON'T CHASE ( if u do, you'll prolly be buying my shares ) - u can always wait for the dip, the inevitable dip..and if that does not come - there's 10 more trains leaving the station soon enough

-DON'T MAKE BOREDOM TRADES THAT BREAK YOUR OWN RULES

-TAKE A BREAK DURING THE TRADING DAY - some of by worst trades have come after a very good or very bad trade where i either felt invinsible or angry - and either state of mind will kill u in the market..

-DON'T GIVE UP ON HIGH VOLUME STOCKS - if the volume is great, time and time again these stocks will run and run after some consolidation..

-DON'T THROW GOOD MONEY AFTER BAD - i'll leave that up to interpretation - but suffice it to say the only time i average down is during a 5 minute period on a bounce ie - dlgi yesterday lol..

-EVERY DAY IS A NEW DAY - if u have a bad day, learn from it, re-examin your trades and where you messed up and do better the next morning

-TAKE MONEY OUT OF YOUR ACCOUNT (PROFITS) EACH MONTH AND PUT IT IN A SAFE PLACE...

-LOSE THE EGO...this is a big one, pride can cost u much...the markets have a way of humbling those who get a large head..

-I HAVE SEVERAL SPECIFIC DO'S AND DONT'S THAT ARE JUST FOR ME AND MY TRADING STYLE - make up your own rules that work for you and stick with what is working..

-HOMERUNS ARE GREAT - but singles and doubles and bunts can get the job done and don't require so much luck..

-LEARN TO SCAN TO FIND STOCKS - if you don't you are relying on others to do the work and they will get most of the reward

-MAKE SURE U ENJOY - if you don't enjoy trading and find yourself in a 1/2 state of panic, maybe this is not for you...it takes a certain type i believe
---
PAY OFF YOUR DEPTS AS YOU CAN WHEN YOU MAKE A LOT OF MONEY IN THE MARKET
- There is no better reward than to have made a great trade where you've made lots of money on it and take most of that money out if you can. Once I was lucky enough to find a windfall that I used to pay off my entire depts and what a relief that was.

MY OTHER FAVORITE IS READ READ READ...
- I always read as a way to brush up on ideas I have either forgotten or need a refresher on.

My ABSOLUTE favorite book is "TOOLS & TACTICS FOR THE MASTER DAY TRADER
By Oliver Velez and Greg Capra (the Pristine.com guys)

It is the best 389 pages you will ever read in your trading career - and yes if you do this for serious money you must treat it like a career and invest time and money in getting great at it.


A Quitter Never Wins and a Winner NEVER Quits!
---------------

1) Always know WHY you are entering a trade. Always know why you are exiting a trade. Every single trade.

2) Don't chase. Enter the stock at a level that makes technical sense, knowing beforehand what a technical failure in the stock looks like.

3) Always, always, always, use a stoploss, trailing or otherwise. Never hold a loser. This is dead money. However, also, never use a “physical” stoploss, only a mental stoploss. If market makers want shares, and they can see yours (with Level III), they will come get them. If you can’t trust a stock (because you’ve never traded it before, or because the technical reason for entry is comparatively weak) or watch the stock, and you have to leave your live charts, sell it.

4) Use Chatrooms and Stockboards as WATCH LIST fodder. Use these posts to build your watch lists only. Do not automatically jump in just because you see your favorite guru posting his entry. You are chasing. And, you are not learning if you do this.

5) Learn technical analysis. At a minimum: Learn how to spot resistance and support levels, and learn how to draw trendlines. Also, work on spotting common patterns, cup and handle, head and shoulders, ascending triangles, box formations, Fibonacci levels, etc. These are your tools; a craftsman has to be able to use their tools well.

6) Trust the chart. Have patience. The chart doesn't lie. It can’t. (But also know what your stoploss is).

7) Trade your day in a completely professional manner. Make it serious business. Don't allow sloppiness to enter into your mindset. The marketplace is completely unforgiving, and the sloppy get slaughtered.

8) Keep emotions out of your trades as much as you can. The more closely you can emulate machine-like executions, the more money you will make. Emotions will cost you cash.

9) Never, never, never chase a stock. Up or down. In or out. If you miss your entry, let it go. Another bus is coming soon. If you miss your exit, remain calm. Identify the next support level, and look for a bounce off that. If no bounce comes, exit, calmly, at that support level. Never chase stocks. If you chase, you are trading with emotion. That is a deadly combination.

10) Sell at least half your shares into strength as price approaches a technical area. Lock in profit. However, don’t close a position just because you have made a certain amount of money; sell for technical reasons. You’ll leave less on the table.

11) Be very selective, especially during low volume periods. Practice sitting on your hands.

12) Don't pull money out of a winner, or a fledging position, to chase another stock that might be moving.

13) In general, sell into strength, but into weakness (but only if the overall trend is up).

14) Especially for OTC, have a target exit in mind, at a point of resistance. Watch closely as the stock approaches. OTC stocks can plummet fast; the use of a simple trendline violation won't always work. Use Level II as a tool for entering and exiting a position only. Don’t watch Level II every single moment (unless you are scalping). Market makers will drive you batty.

15) Never try to "beat" a stock. If you get beat by a stock, move on to another issue, unless there is a solid technical reason for re-entry.

16) Paper trade for at least a few months. No one wants to do this. No me, not anyone. Everybody wants to jump in right after they're flush with their first success. And, bonus, guess what? Paper trading won’t teach you everything you’ll need to know. It’s not even that close to the real deal! But paper trading will help immensely. It’ll save you money.

17) Keep a trading journal. Use it. Always include commissions in the cost of doing business. Note your mistakes. Learn from your mistakes. The market punishes mistakes. You’ll want to learn as quickly as you can.

18) Build redundancy into your trading rig. Multiple connectivity points. Multiple access points to your broker. Multiple computers (in fact, multiples of hardware across the board if you can get it), multiple data sources. Stocks can drop very fast. You don't ever want to be blinded by equipment failure. You can lose money. Use the very best trading rig you can get your hands on. Then duplicate it.

19) Know your datafeed/charting software intimately.

20) If you play news, make sure your news server is fast, and make sure you fills are fast. Otherwise, don’t play news.

21) Keep learning. Never stop.

22) Stay humble. The market will eat your ego for breakfast.

23) Eat right, exorcise. Take breaks during the trading session. Learn to meditate. Then, meditate. This is a high stress business, especially while one is learning.

24) There is a human being behind every post; be nice to people in Chatrooms and Stockboards. They are helping you.

25) If you start to make a consistent profit, don’t forget to pay yourself.

and, finally, The Trend Truly Is Your Friend.
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Basher's Handbook
http://messageboardfools.com/bashers.htm

Don't Chase and Hold <--my problem
http://www.investorshub.com/boards/read_msg.asp?message_id=2817369

trade paper for a while! (simulation)
Investopedia.com

volume, float, share price, % of portfolio, and liquidity
http://www.investorshub.com/boards/read_msg.asp?message_id=2817380

compilation of other rules and important thoughts to consider
remember that you are the market. It is not some
ghostly shadow that does mysterious things out of your
sight. It is what you make it, what I make it, and
what every other trader makes it.

The market does not go up by itself, it's the traders
buying more than the sellers are selling that makes it
go up.

And don't blame every misfortune on the market. Examine
closely the actions that led to the disappointment and
learn from it.

----------

The Investment books: A Beginner's Guide to Daytrading Online by Toni Turner and her latest swing trading book. It shows how to utilize the market internals, reversal period trading and the Trin/tic and of course the S&P and Nasdaq futures, setting stops, buying off intraday support etc. Don't spend zillions on seminars, $100 books and trading systems that make only the producer rich.

Trading in the Direction of the trend of course but my best strategy would be sit on the sidelines until 10:00 a.m. Some traders go ballistic in premarket and at 9:40 or so shouting about upside and "nabbing" stocks only to have them sell short at 10:00 SPIKE HIGHS.



Prepare for gap ups that ultimately crap especially after earnings reports.




Once your stock appears in the Investor's Business Daily, its time to sell off and once its "recommended" as an earnings play to hold by briefing.com, get out while the going is good. Best time to buy stocks that are volatile is in the "anticipation" before an expected earnings report, mid-quarter report, etc.

chances are very high that the anticipation will end up in a rather strong reversal (see CYMI today for an example or the "INTC anticipatory mid-quarter update") Buy the rumor and sell the news makes good sense.



Prepare also for gap fills. Sometimes stocks are down so much in the morning that traders and even some investors look for a bargain and it gets filled quickly. Keep on the lookout for any earnings reports that morning or downgrades on 'favorite' companies that might cause early buying.
------
trading
a stock and taking profits along the way to either get back your capital or lower your cost average...

example

IDNW

you buy 100,000 shares at .05..

you sell 25k shares at .06 on the first 20 percent move

now you have spent 5,000 dollars...
you have got back 1500 dollars

the 75,000 you have left has now cost you 3500 dollars...

than on the next 20 percent which happened to be this mornings gap you sell 25,000 at .07..
now you got 1750 dollars for that

now you have 50,000 shares left..
you spent 5k ,you got back 3250..
so your capital out is 1750 dollars for 50,000
which puts your cost now under.04...

so now becomes your options ,in an ideal stock move you wait for another move of 20 percent to sell another 25k,but you can change your target to suit you,me personally i like to sell enough from this spot to get the capital back and take a little profit and leave something left to go the distance in case the stock goes and i dont have to pay attention..

in this case i sold later in the day 40k at .07
and now have all my capital back from the 5k investment,
plus 1000 of profits and 10,000 shares left that i dont have to watch and can pay attention to other stocks without a worry in the world of the IDNW shares..

this is my definition of position trading,and only something i will do in a good market..
the goal is to make 500-1000 dollars profit on the trade and
have 10-15 percent of shares left in case a stock goes
from .10 to over 1.00 like the 200 that did in 2000....

-------
TAKE A BREAK DURING THE TRADING DAY - some of my worst trades have come after a very good or very bad trade where i either felt invinsible or angry - and either state of mind will kill u in the market.

Yep. If you aren't getting that high than your preperation to succeed will go down along with your success!

MAKE SURE U ENJOY - if you don't enjoy trading and find yourself in a 1/2 state of panic, maybe this is not for you...it takes a certain type

----
"Good judgement is usually the result of experience. And experience is frequently the result of bad judgement. But to learn from the experience of others requires those who have the experience to share the knowledge with those who follows." B. LePatner
---
DO determine the size of your trade based on a rationally selected stop loss point and your risk control rules.

DON'T select your stop loss point based on the size of your trade. This is backwards.


Here's an example: WXYZ is trading at 2.50, and there is a nice support level at 2.25. Also, my risk control rules tell me that I am not willing to lose more than $100 on this trade

The wrong way: "OK, let's see...I'm going to buy 1000 shares of this, so I better set my stop at 10 cents down so I don't lose more than $100. I'll set it at 2.40. (huh???)

The right way: "OK, let's see, based on my chart the best stop point should be at 2.25 which is a 25 cent per share loss. So if I don't want to lose more than $100 I should only buy 100/.25 = 400 shares.
----------
after doing #1

decide if you are going to make an investment or a trade.

there is a HUGE difference between the two.

Warren Buffet who is listed as the 2nd wealthiest individual in the world says you should never buy stock in a company if you would not be happy to own it at half its current price. he also buys large pieces of companies or entire companies with NO EXIT STRATEGY.

wait - i thought if it dropped 8 or 10% that means i should sell. well...if you bought it just to trade and you feel that's what is necessary fine.

decide up front.... am i just buying this paper to flip it at a higher price or am i buying a piece of this company because i believe in its long term potential. in other words - SEPERATE YOUR INVESTMENTS FROM YOUR TRADES.

read IHUB for information on how to TRADE but go here for to learn about INVESTING: http://www.berkshirehathaway.com

begin by reading the annual reports.

you need to know WHAT you are buying and WHY you are buying it.

be careful - if you want to TRADE shares of a company then dont view your purchase as an INVESTMENT. if you are investing in a company then you should view your purchase of shares as a purchase of a piece of the company and not necessarily as a trade.

if i own shares of a company and am long and view my position as an investment... the stock can drop 50% and i wont flinch...in fact, i will generally view it as a buying opportunity.

on the other hand - if im just flipping paper...the stock doesnt even have to drop. i might sell it for the same price i bot it for or sell it if it dips 1% because i didnt buy it as an investment - i just bot it to trade.

traders make money and investors make money...but i dont see any traders on the list of the worlds wealthiest people.

Berkshire Hathaway stock is $93,000.00 because Warren Buffet decided early on that he would not split the stock in order to keep TRADERS away: http://finance.yahoo.com/q?s=BRKa&d=t

-----
Have a written plan for every trading day. For example:
Know where your stops are for every thing you already own,
Have a list of already charted stocks that you would be willing to buy for the following day and what criteria they need to meet in order for you to buy them,
If you alread know what 'don'ts' your susceptible to, write them down for re-inforcement,
(that's just a couple - put in your plan what YOU want to do)

Rarely will your trading day exactly follow your plan but having a good plan can take a lot of stress out of trading and will almost assuredly increase your chances for success.
-----
So you want to daytrade? First thing you do is go to the bank. Withdraw $10,000 in hundred dollar bills and bring them home.'

Go out to the backyard use the money to build a nice pile in the bar-b-que. Pour starter fluid on the money and set fire to it.

Watch it all burn completely to ashes that can't be taken to the bank and be replaced with new bills.

Now you know what is like to lose $10K. If you can't do this, then don't daytrade at all. You don't have the stomach or the money for it.
--------
....ALWAYS keep some funds available for that surprise stock that takes off like a rocket or a real value that you've been waiting for. It's an awful feeling to watch a run that you miss because all funds are tied up.
----
Do trade with the strength or weakness of the industry or sector that the stock or option you are trading is most closely related to. Don't forget that there are ways that you can use to predict changes in the direction of that trading:

Short Term Indicators vs. the SMH; any index can be used - The first set of short term indicators I use are based on the put to call ratio. To go long it is best to wait for the put to call ratio to close over 1.0. On the chart below the put to call ratio now updates intraday but it is not always accurate! Intraday reading of the put to call ratio can be found here updated every half hour after the open:

http://www.cboe.com/MktData/default.asp

The more days in a row the put to call ratio prints over 1.0 this the more likely the bottom will be a strong one. The link above shows intraday readings of the P/C ratio.

Also closes on the put to call ratio below 0.50 and sometimes a bit above are indicative of a short term top. Watch the simple moving averages as well because periods of too much buying of puts or calls will almost certainly bring about market bottoms and tops respectively. On the CPC/VIX ratio; this is largely a longer term indicator where investors are likely to make more money on the long side once the short-term 21 day sma has crossed above the 200 day sma. The reverse is true as well. An investor will likely make more money on the short side when the 21 day sma crosses below the 200 day sma:
--------
DO: try and have an clear idea of what your exit price is when you go in - if it reaches it faster than you expected and you think there's a good chance for it to keep going, sell half!

DON'T - be afraid to go back into a position that you previously lost in.

DO - have a set of rules

DON'T - break your rules - at least try not to, too often (you will eventually break them - if you're human).

----

1.Don't Rush to get in a stock, any stock..because you want
to trade something. You don't have to be in the market
all the time. It will happen.

2.Do Read eveything you can get your hands on like..
The Market Makers Edge,Daytrader's Survival Guide, Penny stocks
the next American Gold rush..Norm mentioned: Master Daytrader
a very good one.There are also trading Mags.

3.Don't try to over complicate T/A there are enough
indicators out there to make any stock look good or bad.
For me Simple is better...but learn enough to know the difference.

4. Please don't believe the hype, get to know a few honest traders here on IHUB to follow. There are to many good one's to name. But the goal is to find a few stocks you have faith in
and flip them over and over.

5. Don't give up and enjoy.. you have plenty of time.
------

"Plan the play and play the plan".

My biggest don't is "don't hope it will bounce back, just take your loss and come to fight another day".

Last, a little turnips wisdom, if the TA and the FA do not jive, believe the TA.
---

Figure out what risk control and money management rules you want to use!! This should be done AFTER you figure out what strategy you're using (breakout vs contrarian, long-term vs short term, etc..)

:

1. Set a maximum amount that you can LOSE on a trade, like 2% of total capital for example. Your individual trade sizes can be larger, but your stops will be tighter as the trade size increases. This is one more suited to an active short-term strategy because it won't tend to tie up your cash.

2. Set a maximum amount that you will allocate PER TRADE (as Zeev said). This means that you don't spend more that 5% of your capital on any position for example. In this example, you could lose your entire position and still be down only 5% on your account. This might be more appropriate for someone who wants to place much wider stops and who is comfortable holding a position at an unrealized loss for a long period of time. One thing to remember: 20 open positions and you're done buying under this method (assuming the 5% figure).

I'm sure there are other risk control methods and examples, but choose one that makes sense for what you're doing.
--
think it should be more what percentage of the capital allocated to training, I suggest no more than 5% to any single position....that assures that even a lousy trade with a halt, does not ruin you and leaves you with enough to come and fight another day.
---
I say... Always continue to invest and don't give up.

I reccommend papertrading a strategy before putting your money to work. This will lessen the burden of losses, if the play doesn't work.

Also- use trailing stops when your stock goes up. Find a percentage or amount behind the high of the day, and move up with the trend. Don't try to guess the top, and don't feel bad taking a profit under that high- cause what goes up, always corrects (sometimes drastically).

Buy a couple of investment books and read them- use the "advice" that fits your stratey. Throw out the complicated crap. Keep it simple.

Record your buys and sells as they occur. Makes tax time much easier, and you can see your results. I use an excel spreadsheet, and I know others that use a leger. Use whatever works for you.

Never buy a stock based on "hype" alone. Research the company. Minimum- check the filings and PRs for diltution and/or legal problems. Understand the risk before jumping in.

Have a plan for an exit stragety- before you buy the stock. Plan the trade and trade the plan. If the plan fails you, know where that breaking point (Max Pain)is.

Never put all your money on one stock. Keep a little on the side for the next opportunity.


Hope this helps a few folk-



Mankind's most frightening risk is not taking any

In order to avoid being redundant by merely re-emphasizing some of the salient points already posted on this thread, I’m going to take a little different approach and provide a step-by-step general outline for new traders.

Few financial endeavors have occupied the time of more people over the years with less success than attempting to “beat the market.” Countless numbers of people have tried and failed. Particularly in academic circles, it is believed that no one can consistently outperform the averages.

Nothing could be further from the truth!

Granted, everyone cannot beat the market, simply because everyone is the market. But that does not preclude the possibility that some investors, utilizing more sophisticated approaches than the public at large, can earn above average returns on their trades and investments. To do so, however, requires the development of a logical investment strategy, which takes advantage of the very weaknesses that deny superior returns to most traders and investors.

As a prelude to increased stock market profits, it is necessary to reject the concept that chance alone governs who wins and who loses on Wall Street, while recognizing that most speculators who seek a get-rich-quick solution will instead end up amongst the big losers. Traders expecting to double their money every year will fail almost without exception, while those with reasonable expectations and a sophisticated and rational approach will usually be well rewarded for their effort.

The first step in building a successful trading strategy is to learn as much as possible about where stock prices in general are headed. Utilizing a vast array of stock market indicators, such as those listed in the link below, will provide some guidance in determining market direction.

http://www.technicalindicators.com/stocksshortind.htm

The second step is combining information from diverse sources into a single rational forecast. Although many of the indicators work well enough most of the time, virtually none are always correct and rarely do they all ever point in the same direction. Many forecasting models exist; therefore exposure and research are required in order to find which one(s) work best, depending upon each individual trader’s objective.

The third step is developing a stock selection strategy. There are a seemingly endless number of techniques for picking winners, most of which are of dubious value. For starters, here are a few sources I favor:

http://www.briefing.com

http://www.realtimetraders.com

and

http://cbs.marketwatch.com/news/default.asp?siteid=mktw

The fourth step a new trader should concentrate on is developing an approach that combines rational theory with a history of superior results. Evidence is adduced that raises extreme doubts about the validity of the random walk theory. An old Wall Street adage goes, “Don’t tell me what to buy, tell me when to buy it. In fact, what and when are two sides of the same coin. Both are essential to a successful trading strategy.

The fifth step to trading is learning to apply the tools to portfolio management. Traders must define objectives and utilize several methods, in order to improve total returns and adjust risk levels. These techniques include religiously using stop loss orders on losing trades and trailing stops on profitable trades in order to preserve gains. Living to trade another day is one of the main objectives.

The sixth step involves keeping score. The trading game obviously does not yield uniform profits to all its participants. Instead it dispenses large gains or losses to a relatively few traders, leaving most players as small winners and losers. Judging your portfolio returns, including accounting for shrinkage, against the market averages provides a measuring stick in determining relative performance.

Never, never, never enter a trade emotionally. You will always lose money.
Like averaging down a stock you like when it tanks just to show you are right and the market is a fool.
Or taking profits right away because you are afraid of losing it, without looking at the chart to decide whether there is more upside left with small risk.
Buying because you hear somebody that a stock is hot, so you just jump in before it explodes without looking at where the stock is in terms of technicals.
I have done all these mistakes. they have costed me money all the time.

The secret instead is to buy and sell when you hate doing it. That is the time that you are going to buy at the bottom and sell at the top

If you're gonna play the pennies....

You 'MUST' consider the following!

Subject: 'Leverage' aka 'Money Management'

You must use percentage/leverage, if you do, it becomes your friend.

Let's say you bought 'XYZ' @ .02 and for whatever the reason, you're still holding all your initial and subsequent buys. You come home from work one day and find it closed @ .075.... that's over 300%.... "I think you're starting to fall in love?" if you don't sell some now! Don't get caught holding a bag because you read some faceless and nameless post that said 'It's going to .12".

The thing has already given you over 300%.... in order for it to give you 1 more 100% it must "DOUBLE!!!".... 'hello!'

You're overdue. Sell some of your little boy/girl friend and go to cash and start looking for another 'Lolla Lovely' or "Mr. Wonderful'.

The attributes your new love interest should have should be the following:

1) The PPS should be at least 200% lower than the PPS of the stock you sold.

2) It should meet the same criteria that made you buy 'XYZ'.

3) If you don't find it today......"THERE'S NO RUSH".......'that's why God made tomorrow!'

The more shares you have the more 'bang for the buck'.

"LEVERAGE is KEY"!!!!!

By saying "do paper trades", It means this:

Start doing your research, frequent traders boards who seem to have something to offer. Identify companies whose stock you might consider trading. Then research the heck out of those firms (I would recommend you stay away from penny stocks as others have recommended. Often there is little hard data on such companies and even more often what data is available is unreliable).

Then decide what you want to trade. Are you going to swing trade? Are you going to day trade? (Note: If you don't know what these terms mean, my following advice is even more important).

NOW .... execute your trades on paper. What this means is write them down on paper next to your computer. DO NOT log in to your online brokerage account. DO NOT call your broker. DO NOT actually purchase, sell, short, or option any stock. JUST WRITE IT DOWN ON A PIECE OF PAPER NEXT TO YOUR COMPUTER. Continue trading your selected stocks this way (on paper next to your computer), keeping track of what you are making (or losing) on each trade. See ... now you are learning! And you haven't lost a plug nickle yet, even though you are getting an education.

Continue doing this for as long as it takes. Believe me, you will start off losing money (on paper). Keep doing this until you start making money (on paper) and feel confident in what you are doing.

Now ... try the real deal. DO NOT risk a lot of $$ starting off. Only risk what you can afford to lose. If you do lose, go back to paper trading until you get better. You may end up only paper trading for months until you understand what you are doing. GOOD!! You don't want to risk real $$ until you REALLY understand what you are doing. Until then, leave your $$ in a savings account.

Otherwise, you may as well go to Vegas or flush your $$ down the toilet.