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STOCK MARKET TIMING TIP #1: LINE UP YOUR CHIPS!

November 17th, 2011 Comments off

LINE UP YOUR CHIPS: Anticipate initial buying when the public sentiment is highly pessimistic and the market has dropped too far for too long. The duration and extent of a market decline will largely determine the degree of negative investor sentiment. Therefore, finding an accurate way to calibrate the degree of investor sentiment is of primary importance to timing the market correctly.

Here are some recognized investment services that can help you determine when investor sentiment indicates that the stock market is ready to rally: the American Association of Individual Investors (AAII), the Market Vane Sentiment Survey, Investor’s Intelligence’s US Advisor’s Sentiment Report, the NAAIM survey of professional market timing oriented money managers, and Sundial Capital Research’s sentimentrader.com advisory service. (Note: Each of these services has a different method for gauging investment sentiment or market psychology. A savvy investor must take a closer look at each of these services in order to determine which ones provide the most accurate clues as to the future direction of stock prices. My personal choice is sentimentrader.com advisory service which is updated after each trading day.)

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Comment: I view sentiment as a key confirmation of technical clues in the stock market. It’s most useful purpose is in locating ideal buy opportunities. But it don’t feel as strongly about its use in locating market tops. Top formations often take more time to develop than bottoms.

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“The worse you feel, usually because the news is bad, the safer the market is. The better you feel, usually because the news is good, the closer you are to a top.”

John Train ~ Author & Head of Train and Smith Investment Counsel

Categories: Stock Market Timing Tags:

MARKET ANALYSIS TIP #1: MANAGE YOUR TIME WISELY!

November 17th, 2011 Comments off

MANAGE YOUR TIME WISELY: Spend 80% of your time on deciding “when” to buy. Spend another 15% on “how much” to buy. And spend only 5% on “what” to buy. The majority of amateur investors spend the bulk of their time in search of the few great individual stocks to buy.

The Wall Street Craps approach calls for buying the general market with broad-based Exchange-Traded Funds for proper diversification and liquidity. Therefore, little time is necessary for researching specific stock candidates. Instead, the bulk of time allocated to stock market investing is spent on gauging market indicators and allocating funds appropriately. This strategy alone will free up plenty of time for engaging in other important non-investing high-priority activities in your life.

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Comment: Jim Cramer, a popular media investment figure, likes to say that an investor needs to spend at least one hour per week studying each stock that they own. He also maintains a model portfolio of 25 stocks for his private subscribers. This means that each investor should spend about 25 hours a week studying their stock portfolio. This seems like way too much time for the average person. And besides, what exactly are these investor going to be studying? In most incidents, it means simply going on the Internet and reading other people’s opinions. Again, this is a big waste of time.

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“You must think ahead, plan your actions, and have the discipline to adhere to your plan. Never ever underestimate what the market can do.”

Dean Lundell ~ Author of Sun Tzu’s Art of War For Traders And Investors (1997)

Categories: Market Analysis Tags:

THE WINNER’S JOURNEY: PLAY FOR THE LOVE OF THE GAME

November 13th, 2011 Comments off

A Savvy Investing Take: There are many ways to play the stock market, depending on the time-frame which best suits your needs and desires. The daily and hour-to-hour time-frames are usually too volatile and stressful for most non-professional investors to play well in. On the other hand, many investors don’t want to confine themselves exclusively to long-term investments in the yearly time frame.

For those who want to trade part of their investment funds in the more opportunistic weekly-to-monthly time frame, the Wall Street Craps approach offers investors a way to come out a winner. But more importantly, remember to resist the temptation of relying too heavily on clever strategies, innovated tactics, and sophisticated systems in order to achieve stock-market success. Understand that what ultimately separates the winners from the losers in any approach to the stock market is the inner ability to make wise decisions about money management and correct disciplined actions.

In the final analysis, the only consistent way to end up in the stock market winner’s circle is by acquiring the habit of thinking the right thoughts that naturally lead to success at investing, trading, money, and life.

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The stock market is a challenging game that can be played for both fun and profit. When properly understood, it provides investors at all levels a fair chance to test their skills and emotions in an ever-changing arena. Once you learn how to allocate your assets appropriately and invest at a level that suits your own emotional temperament, you will be in the right position to begin playing the game correctly. Then it’s just a matter of improving your methods, enjoying your moments, and staying in the game until you complete your own winner’s journey to investment success.

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“ Money was never a big motivation for me, except as a way to keep score. The real excitement is playing the game.”

Donald Trump ~ American business magnate

Categories: The Winner's Journey Tags:

SIDELINE ADJUSTMENTS: PREPARE FOR YOUR NEXT BIG MOVE

November 13th, 2011 Comments off

A Savvy Investing Take: For many investors, trading the stock market can be a stressful activity. It’s one where you’re going to make mistakes and rarely, if ever, achieve perfection. Therefore, it’s necessary for you to take occasional breaks from the action in order to keep your mind fresh and to recharge your spirit.

But there may be tactical reasons for getting out of the stock market, as well. Perhaps the market has gone up too much for too long; as a result, it has become grossly overvalued and much too popular with the public. Or on a personal basis, maybe you have too much money at risk, and the anxiety of holding such large positions is preventing you from getting a good night’s sleep. Another personal reason may be that you’ve been on a long losing streak and need a break to figure out what you’re doing wrong. Or perhaps your thinking is clouded by stressful personal issues that need your immediate attention.

In any of these cases, it makes perfect sense to spend some time on the sidelines away from the action of the market. That way, you’ll be ready and willing to go back in the game and perform at your best when the next opportunity arrives.

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Being fully invested in the stock market at all times is a strategy for losers. It’s far wiser to spend some time on the sidelines to clear your mind, rebalance your emotions, and prepare yourself for the next big trading opportunity. Always remember that your ability to make high-quality decisions is more easily achieved with a calm state of mind, which stems from a wise philosophy on investing and life.

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“Any person who tries to be in the market at all times is almost certain to lose money, for there are many periods when even the most skilled trader is in doubt as to what will happen. A wise man lets the market alone when the averages disagree.”

Robert Rhea ~ Author of The Story of the Averages (1932)

Categories: Sideline Adjustments Tags:

THE SELLING TEST: DECIDE WHEN TO CASH OUT

November 13th, 2011 Comments off

A Savvy Investing Take: The act of trying to sell your stock positions at the perfect time and at the highest possible price is nearly impossible to do. As a result, you will automatically be inclined to second-guess your decisions to sell. A word to the wise: do the best that you can, learn from your mistakes, and move forward to your next opportunity.

Granted that selling early and thereby missing out on a big run to the upside is not enjoyable to watch. But remember that it’s a far greater and costlier mistake to allow your losses to grow in size and then to sell out in an emotional state of fear and panic.

Even though every investor knows that you have to cut your losses short, very few have the stomach to do this under the pressure of trading. This is one of the key disciplines that separate the amateurs from the professionals in area of stock market trading.

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For most investors, it is more emotionally challenging to sell than it is to buy. Perhaps that is why the “Buy & Hold Strategy” is so appealing to amateur stock players. With this long-term approach to the stock market, an investor never has to face the tough decision to sell when the final outcome is still in doubt. But this is also why so many amateur stock players end up taking large losses, instead of having the decisiveness to cut their losses short. The key point to remember here is that you must learn to sell when the market indicates that the “time” is right and not when the “price” is where you want it to be.

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“ Losing potential profits hurts the ego; losing money really hurts.”

Gerald Appel ~ President of Signalert Investment Management Firm

Categories: The Selling Test Tags:

TRADING POSITIONS: STAY SHARP WHILE YOU PLAY THE GAME

November 13th, 2011 Comments off

A Savvy Investing Take: A popular notion among most stock market investors is that success can be boiled down to a simple matter of deciding when to buy, when to sell, and when to hold a particular security. Of these three investing decisions, the matter of knowing when to “hold” your position in a particular stock is perhaps the least thoroughly examined.

As most savvy investors will agree, the act of holding a position in a stock is a challenging task that requires clear thinking and self-control in order to do so effectively. Over time, there will be examples when you hold on too long and sell too late, thereby missing out on profits or incurring larger than necessary losses. On the other hand, there will be times when you sell out too quickly so that you don’t have a chance to recover from temporary losses or miss out on greater gains. The challenge is to consistently hold on to your stocks for an optimal period of time, with the knowing that it’s almost impossible to do this task to perfection.

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You can’t afford to be too casual in your approach to trading the stock market when you are holding significant positions. Today’s volatile stock market will quickly punish those investors who fail to make the necessary decisions at the opportune time. Choose instead to stay sharp and ready to act whenever you have trading positions in the market. The proper time to neglect the stock market is when you’re away from the action and sitting on the sidelines in a safe 100% cash position.

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“The speculator must be in constant and immediate touch with the market and with his broker… he must either take up speculation as his profession, or must, at least, be entirely free from confinement to any other business calling.”

Frederick D. Bond ~ Author of Stock Prices (1911)

Categories: Trading Positions Tags:

STOCK MARKET TIMING: KNOW WHEN TO PLACE YOUR BETS

November 13th, 2011 Comments off

A Savvy Investing Take: A classic stock market axiom advises investors to “buy low and sell high.” But many overly ambitious investors have misinterpreted this message to mean “buy at the exact low and sell at the exact high.” Those who naïvely try to do this will eventually discover that this objective is rarely achieved. When it does occur, there is a huge element of luck involved.

So when it comes to timing your stock purchases, the wiser approach is to buy in a range where the market is: (1) undervalued in price, (2) unpopular to the masses, and (3) starting to make its move upwards. Time your purchases with a well-diversified mix of good stock candidates around these three key criteria, and you will have greatly increased your chances of winning at the stock market game.

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When it comes to buying stocks near cyclical market lows, successful traders must recognize and control their level of fear. Some of the best opportunities to purchase stocks at bargain prices come when the public panics or becomes hopeless after a period of relentless bad news. Become a savvy investor by learning how to separate yourself from the masses, in regards to your emotional response to the stock market’s action. That way, you’ll be ready and willing to buy when weaker players are selling out of fear.

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“He who knows how to be aggressive, and yet remain patient, becomes a receptacle for all of Nature’s lessons.”

Lao Tsu ~ Ancient Chinese philosopher

Categories: Stock Market Timing Tags:

MARKET ANALYSIS: EVALUATE WITH MORE PRECISION

November 13th, 2011 Comments off

A Savvy Investing Take: There are two steps that go into making any type of decision. When you’re presented with evidence from the environment, the first step is to determine “What does this mean?” The second step is to decide “What should I do?”

When it comes to stock market trading and  investing, the natural tendency for most investors is to skip the first step in the decision-making process and go straight to the question, “What should I do?” However, in order to make wise investment decisions with serious money, a savvy investor must first determine “what things mean” with the highest possible degree of accuracy. That’s where the importance of thorough market analysis comes in.

If you want to be successful at playing the stock market, your first step is to develop a fundamentally sound process of evaluation in order to gauge the meaning of the evidence that the market presents. Only then can you move confidently to the next step of deciding “What should I do” when the stock market environment is signaling a time for immediate action.

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In order to achieve above-average investment results over the long run, you must develop an objective process for making sound decisions. And many stock market strategists contend that the approach you choose should also be somewhat different from what the majority of other speculators and investors follow. The Wall Street Craps approach, as described in this book, offers a unique approach to both money management and stock market trading. It’s one that many individual investors can understand and master on their path to achieving overall financial success.

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“To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.”

Warren Buffett ~ Legendary American investor & philanthropist

Categories: Market Analysis Tags:

A Wall Street Craps Definition: Market Analysis

November 10th, 2011 Comments off


market analysis:

1. the ability to decipher the clues surrounding the stock market in the effort to make more intelligent investment decisions.
2. the process of evaluating past and present evidence related to the stock market and making high-probability correlations to future price performance.
3. the key prerequisite to timing your stock market moves successfully when playing Wall Street Craps for fast money with less risk.

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“No matter what the stock market does, people want to know how it did it, why it did it, and why it didn’t do something else.”

Richard Saul Wurman, Alan Siegel, & Kenneth M. Morris

Categories: Definitions, Market Analysis Tags:

BUY CANDIDATES TIP #9: HAVE YOUR STOCK CAKE AND EAT IT, TOO!

November 10th, 2011 Comments off

HAVE YOUR STOCK CAKE AND EAT IT, TOO!:Ideally, stock market investing should be a profitable game that is fun and interesting for you to play as well. So if you get lots of pleasure out of picking and choosing your own individual stocks, then by all means go ahead and do so. Just make sure that your overall portfolio is properly diversified, with the bulk of your investment funds spread over many companies and several different market sectors.

The amateur Craps player will most likely place random bets of varying amounts on an assortment of numbers on the Craps table layout. He or she usually doesn’t have any kind of organized system for selecting their number(s) or controlling the size of their bets. His or her success or failure is dependent entirely on the roll of the dice.

According to the three-part asset allocation strategy that includes security assets, growth funds, and play money, the best place for purchasing individual stocks is in the area designated as growth funds rather than the area described as play money. That’s because over the shorter term, an individual stock may not respond to general market movements. With time being a key factor in short-term trading, funds that are designated as play money should be in broad-based Exchange-Traded Funds that will automatically move in the same direction as the general market. It’s over the longer term that a fundamentally sound individual stock has sufficient time to stabilize and then to go up in price from undervalued to more fairly valued.

Here’s a simple strategy for buying individual stocks in the growth funds portion of your asset allocation plan:

  • Place about 80% of growth funds money in broad-based growth-oriented no-load mutual funds. Mutual funds usually impose extra fees for short-term trading, and this serves as a natural way for investors to hold on for the longer term.
  • Put no more than 20% of your remaining growth funds money in a small selection of actively traded individual stocks that you enjoy following.

By doing things in this manner, you can have your cake and eat it, too. You will be allocating your money wisely and playing the stock market game correctly. At the same time, you’ll still be having the freedom to take a flyer on a few individual issues that strike your fancy.

Categories: Buy Candidates Tags: