Stock Trading - 7 Secrets for Surefire Profits!

I love stock trading. I've actively traded in the stock, bond, options and futures markets almost every day for over 30 years, and I've learned some secrets to significantly improve my success. I will share them with you.

The cardinal rule it's this: "Don't get your ego involved!"

Always remember you're in this game to make money, not to impress your friends. You don't need to be right all the time... it's virtually impossible. So learn to take losses when a trade isn't working - and take them quickly and move on.

W.D. Gann had a great trading rule: "Cut your losses short, let your profits run".

I am a swing trader and I live by that rule. If a trade is working I hold it. If it violates my stop price I exit. Usually I like to hold trading positions for two weeks to three months, rarely longer.

These days with the proliferation of ETF's and options it's just as easy to be short as long. So we no longer need to worry about the direction of the market, or whether we're in a recession, going into a recession or in the middle of a boom... every day is a good day in the market. There's always an opportunity out there... we just have to find it.

I'm not going to teach you how to invest - I'm a stock trader - I'll teach you how to trade. If you want to invest... buy a bond!

Your capital is your weapon... guard it well. Don't trade with a full service broker - the fees will kill you until you have enough money to demand a big discount.

Here are some rules to help you:

1. The market is made up of stocks in a variety of industry groups that are all in different stages of rally or pullback. Your first job is to define these groups, follow them daily and get to know how they trade. The main groups I like to follow are financial services, technology, energy and metals and mining.

2. Trade in the larger stocks that trade lots of volume every day. Choose a handful of stocks in each group and follow them daily on your charts. I know a lot of you want the big killing on the junior market and I have a suggestion about that later, but that's another game entirely. If you find a $50 stock that makes $10 swings every 3 months and you can clip $5 out of each swing, that's $20 a year on a $50 stock - 40% - not bad.

If you want more action than that then use deep in the money options that have virtually no premium built in to the price and get your leverage that way.

3. Try not to have an opinion about the broad market direction... it's totally unimportant to your trading future. Instead, follow your groups and form a loose opinion of the direction of each group. If gold is going up then likely financials are going down so be long a gold stock and buy the Bear ETF on the financials.

If the general trend of your group is down then focus on taking the short trades in that group because the down moves will be bigger and vice versa.

4. Find some stocks that follow the 3 month cycle rhythm. Preferably stocks that tend to stay in trading ranges for quite a while and watch their charts every day, learn their patterns; lay in wait for them to come to you and then take your position either long or short. Don't feel you have to take any old trade that comes along... wait for all of your indicators to flash you the go signal.

5. I find it's critical to use some sort of momentum indicator like Slow Stochastics or MACD or RSI to give me the overbought/oversold readings as my first signal that a trade may be on. When the oscillator readings get to the 20 or 80 levels I get ready. Now I start to watch for a trendline break in the price or a breakout from a small consolidation pattern and I take a position. I place a mental stop below the last low or above the last high or for a maximum dollar amount I am willing to lose and I execute on that stop and get out.

6. Whatever money you have available, divide it into 10 and look to take 10 different positions, long or short it doesn't matter, usually it's a mix of both.

7. Be patient. You don't need to have all of your money deployed all of the time. Wait for the trades to come to you. If you get a sudden windfall move in a stock triggered by some news event and it takes the price into an area of support or resistance... grab your profit. These moves are reversed a big percentage of times and it hurts to watch that windfall disappear.

I am in process of writing a book that will give you a hands-on method for consistently making trading profits. But it isn't ready yet so in the meantime here is a resource you might want to look into.

This software works with low priced stocks and it can give you an unfair advantage. It can monitor hundreds of stocks at one time developing what professional traders call a "sixth sense"... a sort of "feel" for how the stock will behave in any given situation.

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