29 Jan
Best Trading Tips, Blog

How To Profit From Earnings Season [Hint; It Has Nothing To Do With Earnings]

earnings---wsj‘EARNINGS SEASON’ DEFINED

Publicly traded companies report their earnings four times a year. Typically, this is done at the beginning of each quarter and the company tells shareholders what happened over the past three months. This period is also known as earnings season. Put simply, it describes a period time when the majority of companies released their earnings to the public. Earnings season occurs during: January, April, July and October (the first month of each new quarter).

WHAT SHOULD YOU LOOK FOR?

Most investors look for three things during earnings season:
1. Sales
2. Earnings
3. Guidance

Consistency:

To get an accurate read, it is important to compare the same quarter each year vs the same quarter in the prior year. For example, in January, companies report how they did in the fourth quarter (Oct-Dec) of the prior year. The fourth quarter tends to be strong for most companies because of the holiday shopping season. So it would not be accurate to compare sales in the fourth quarter vs sales in the third quarter. To remain consistent, investors tend to compare the same quarter vs the same quarter in the prior year. For example: Q4 2014 vs Q4 2013. Ideally, investors want to see strong growth in both sales and earnings vs the same period in the prior year. In addition to reporting earnings and sales growth- Most companies also release guidance for the new quarter and rest of the year.

My Secret Ingredient To Earnings Season:

In addition to analyzing the data, I place a stronger value on how the stock reacts to the data. I have seen stocks fall after reporting strong numbers. I have also seen stocks rise after reporting weak numbers. Therefore, this subtle, yet very important, clue offers investors great insight into how the stock will react over the next few months. Paying attention to how the stock reacts to the numbers is a very powerful tool to understanding how investors will react going forward. Check out FindLeadingStocks.com if you want specific buy and sell signals in leading stocks.
 

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11 Dec
Best Trading Tips, Blog, Psychological Analysis

Trading Math Part II – Don't Let Statistics Fool You

Risk - RewardsRisk vs. Reward

Last week I wrote an article titled Trading Math and received quite a bit of positive response from it. The article discussed the importance of keeping your losses small and letting your winners run. This week, I want to follow up with a brief introduction to risk and reward in capital markets. Put simply, every transaction on Wall Street presents a chance to both win and lose. In the simplest sense, successful traders make more money than they lose and unsuccessful traders do the opposite. The risk of the trade is the difference between your entry price and your exit price, if you are wrong. The reward of the trade is the difference between your exit and entry prices, when you exit with a profit.

How Unsuccessful Traders View Risk & Reward

Most people get caught up in the headlines and do not properly understand statistics, especially on Wall Street. For example, if someone tells you their win loss ratio is 90 to 10 (meaning they win 90% of the time and lose 10% of the time). At first blush you might consider that to be a very healthy win-loss ratio. But what if I told you that you can still lose money by winning 90% of the time and that ratio in and of itself has nothing to do with whether or not someone is a successful trader. The key is to understand Trading Math and look at the amount of money you win vs the amount of money you lose when wrong. The following exaggerated example will help illustrate this point:

Trader A: 90/10 Win rate

Trader A placed tend trades and won nine times and lost once. In this example, the trader won $1 for each winning trade (total won $9) and lost $10 when she was wrong (total lost $10). As you can see in this simple example, even though the trader had a 90% win rate, the trader still ended up losing money difference = negative $1). So clearly, the overall win-loss ratio is misleading and has nothing to do with the bottom line.  Let’s take a look at trader B

Trader B: 1/99 Win Rate

Trader B placed one hundred trades and only won one time and lost ninety-nine times. In this example, trader B lost $1 for every losing trade (total $99) and won $199 on her one winning trade. In this example, the trader ended up making money even though she lost 99% of the time!

How Successful Traders View Risk & Reward

Successful traders think in probabilities, not absolutes. They know that anything can happen on Wall Street and are prepared for any possible outcome, before they risk a penny. As we approach the end of the year (and quarter), I like to do an inventory of all my trades and study my actions, learn from my mistakes and see how I can improve my process. I also know that most (not all) successful traders have a win loss ratio of close to 40/60. Meaning they only win 40% of the time but end up making a lot of money because they cap their losses and let their winners run. I show FindLeadingStocks.com members exactly how to do this in real-time. Here’s to a VERY strong 2015!
 

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04 Dec
Best Trading Tips, Blog, Psychological Analysis

Wall Street Math: Rethink Your Numbers

Trading MathHow To Limit Your Losses

There is an old maxim on Wall Street that says successful traders limit their losses and let their winners run. Simple enough, right? But knowing how to actually do that consistently is not easy. Why? Because it is counter-intuitive in nature and goes against what comes “natural” for most people.

How Unsuccessful Traders Use Fear & Greed

As a quick refresher, the two most dominate emotions that drive markets across the globe are fear and greed. They are the one constant throughout history and will always be present in the markets for the rest of time. Remember, markets take on the personalities of their participants and the way the basic emotional triggers work is that when someone buys a stock at 30 and it goes to 33 they are fearful that they will lose their profits and quickly sell to lock in the gain. Conversely, if they buy a stock at 30 and it falls to 25 they become greedy and hope that it will go back up so they can get out and break-even. Another psychological layer comes into play at this point because for most unsuccessful people they believe that selling for a loss means they are “wrong” and that hurts their ego.

How Successful Traders Use Fear & Greed

One common trait found among successful traders is that they operate with the notion that markets are counter-intuitive in nature and learn how to consciously remove their emotions from their investment “decisions.” This process allows them to cut their losses and let their winners run.  In the above example, the successful trader will do the opposite- hold on to their winner and cut their loser quickly. The successful trader always has an exit plan before they buy a stock. This way they know (ahead of time) where they are going to get out if the market moves against them and how much they are going to lose, if wrong. They also know that profits are a function of time and that they learn how to be patient with their winners and impatient with their losers. Once you realize that taking small losses is inevitable you can plan for them and no longer take it personally when you are stopped out for a small loss. Instead, it becomes a cost to doing business.

Trading Math

Another important fact that supports this notion is the concept of simple mathematics (see table above). It is infinitely easier to recover from a small loss than it is to recover from a large loss. The numbers below do an excellent job illustrating this important and often overlooked concept.

Creat A Plan, Then Trade Your Plan

So, next time you want to buy a stock – ask yourself, where will I exit if wrong and how much am I going to lose. This simple, yet often overlooked, step will help you take small losses because once you have a plan, all you have to do is trade your plan. If you want to see how I do it, I show FindLeadingStocks.com members my process by giving them exact buy and sell signals in real-time so they always know exactly where to get in and where to get out before the market even opens. Then all they have to do is trade the plan.
 

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19 Nov
Best Trading Tips, Blog

How To Create Your Own Mutual Fund

ETFIntro To ETF’s

Whether you are a long-term investor or an active trader- every buy or sell decision you make in the market begins with an idea. Do you think this stock is under-valued? Do you think this is a growth stock? Is the economy going to expand or contract over the next 6-12 months? Does this stock have an exciting new product that is “in-demand?” Do you think gold will be higher or lower in the next 12 months? Will energy prices be higher or lower next quarter? Etc…etc…

Ideas Move  Markets

Make no mistake about it, the right idea in this business is priceless. The market thrives on ideas and the number one reason why most people under-perform the market is because they do not have access to the right ideas. Instead, they shoot from the hip, do not have a plan, then let their emotions take over every time the stock moves a few points in, or out, of their favor. There must be a better way….I  know making money on Wall Street is not easy (unless you have the right ideas) and that’s the exact reason why I created FindLeadingStocks.com. To help you succeed on Wall Street. In addition, to giving you exact entry and exit points in leading stocks, I also show members how to express investing ideas via Exchange Traded Funds (a.k.a. ETF’s).

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ETF’s Defined:

An Exchange-traded fund is a relatively new instrument that trades like a stock and has changed the way capital is being deployed on Wall Street. ETF’s, like stocks, come in all different shapes and sizes, but they all represent a way to profit from an “idea.” For example, let’s say you want to buy gold in your IRA (or normal trading account) but can’t buy physical bullion and don’t want to buy individual gold stocks. The easiest way to express that view would be to buy the GLD, which is a highly liquid ETF that tracks gold prices. The GLD reflects the price of gold and can be bought and sold instantly. Another investor might want to invest in biotech stocks. So they might buy the IBB, a highly liquid, and very popular, Biotech ETF. So on and so forth.

How To Find The “Right” ETF:

The latest studies show that there are over 1,500 ETFs on the market, and over 150 new ETF’s launching each year. This is why it is very important to pick the right ETF. The way that I use ETF’s is to start by asking myself what is my underlying investment idea? Do I want to own tech stocks? If so, then I will look at all the available tech ETF’s and then narrow my search down to the top 3 most liquid tech ETF’s. Then, I’m able to select the one that best expresses my underlying view. If they are all the same, I will usually choose the one that has the highest average volume (trades the most shares each day). This way I know I can comfortably get “in” or “out” anytime the market is open without a hassle.

Are ETF’s Expensive?

Are ETF’s expensive? The answer is no. According to ETF.com, the average U.S. equity mutual fund charges 1.42% in annual expenses and the average U.S. equity ETF only charges 0.53%. If you look closer, the vast majority of ETF money is being invested with an average fee of only 0.40%. That is a huge difference.

Create Your Own Mutual Fund

Another benefit I find when investing in ETF’s is that I can use them to easily create my own custom mutual fund. Meaning, I can buy (or sell) a basket of highly liquid ETF’s, and/or individual stocks, that allows me to very easily create a mutual fund (but at a fraction of the cost). I show FindLeadingStocks.com members exactly how to do this and incorporate ETF’s into our investment toolbox each week. If you want to learn more, why don’t you try FindLeadingStocks?

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17 Oct
Best Trading Tips, Technical Signals

3 Ways A Market Can Move

SPX- Support Becomes ResistanceThere are only three ways a market can move: up, down, or sideways.

Trending Markets: Up & Down

Uptrends are known as bull markets. In the simplest sense uptrends occur when markets are moving up. The definition, of an uptrend varies depending on your time frame. A day trader tends to look at short intra-day time frames (10 min, 30min, 60 min etc). Swing traders (a.k.a. intermediate term traders) tend to look at daily or weekly charts. While, Long-term traders look at monthly, quarterly or annual charts. The beauty about Wall Street is that you are free to look at any time frame you want. The key is to find something that works for you and learn how the market reacts in that time-frame.

Sideways: Trading Ranges

Markets do not go straight up or down. They spend a lot of time moving sideways within uptrends and downtrends. The sideways action is important to understand because that is the market’s way of “setting” up for the next move (up or down). When a market moves sideways it is also known as a trading range (or base). Trading ranges are very common in the market and happen all the time. Moreover, they come in all different shapes and sizes. Once you learn how to identify trading ranges it gives you a huge edge on your competition because most people spend time analyzing a company’s sales and earnings but not how the stock actually trades.

Support and Resistance:

During these sideways moves, markets form two key areas: support and resistance. Support is known as the bottom of the trading range, while resistance is the top of the trading range. These areas are important because once resistance is broken a new uptrend forms and ideally the bulls want to see resistance become support. Conversely, once support is broken, a new downtrend forms, and the bears want to see support become resistance. As with any “rule” there are exceptions but the broader concept happens more often than not and is important for you to understand.

Putting This In Action:

So how does apply in real-time? As mentioned in prior articles, the market spent most of the summer forming a large topping pattern (after a big move). The S&P 500 sliced below support (1904-1905 area) of its large top pattern and, as of this writing, has yet to recover. The bears want to see support become resistance and a new trading range develop below the old one. So as long as the S&P 500 continues trading below 1905, by definition, a new downtrend has emerged and the path of least resistance is lower.

Earnings In Play

Right now, the short term focus is on earnings and how the market and leading stocks react to earnings.

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26 Aug
Best Trading Tips, Blog

Focus on Probabilities, Not Possibilities

The Great Disconnect: Wall Street vs. Main Street

The S&P 500 hit a new all-time high this week and topped the psychologically important 2,000 level for the first time ever. The S&P 500 is up approximately 8% for the year, after rallying a very impressive +29% in 2013! If you lived on another planet and were told the S&P 500 is at an all-time high, one would expect to hear that the US economy (Main Street) is surging. Unfortunately, the US economy has been barely growing. In the first quarter of 2014, the US economy actually contracted. So how can the market be at a new all-time high if the US economy is barely growing?

Wall Street Moves Before Main Street:

The economy is improving and Wall Street looks forward, while fundamental data looks backward (tells you what already happened). Here is a real-life example to illustrate this point. On Tuesday, we saw durable goods surge +22.6%, easily beating the +5.1% forecast. This illustrates how Wall Street moves BEFORE Main Street. Stocks are already up nicely for the year and Main Street is just now catching up. As long as stocks continue to rally, Wall Street believes that Main Street will continue to improve for the foreseeable future.

This Is Normal & It Happens All The Time:

Throughout history, we have seen this phenomenon occur over and over again. After studying countless market and economic cycles, I have found that Wall Street tends to move 3-9 months before Main Street. It is important to note that just like most every other rule, there are exceptions.  The primary exception is that Wall Street does not always move before Main Street but it does the vast majority of the time.

Who is the Smartest Guy In The Room:

In life, and in the stock market, success is about stacking the odds of success in your favor. In Las Vegas, there is an old adage that says- you want to always know who the smartest guy in the room is. Most people look around the room and try to size up their competition. However, the real answer in this scenario is that the smartest guy in the room is the person who owns the room! Why? Because the person who owns the room knows that, in the long-term, the odds of success are clearly stacked in their favor.

Focus on Probabilities, Not Possibilities:

The same rule applies to Wall Street and most other endeavors in life. Before making a decision (where the outcome is uncertain), ask yourself: Are the odds of success stacked in my favor? If not, you might want to think twice before making that decision. Remember, anything is possible in life, but success comes from measuring what is probable. The same is true for buying and selling stocks on Wall Street. Define and measure your downside before you enter the trade, this way you know exactly where you will exit if wrong and how much you will lose. If you are comfortable with that risk, and see a favorable reward, then you should take the trade. Otherwise, if the risk/reward ratio is not favorable, move on to the next idea.

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11 Jun
Best Trading Tips, Blog, Market Legends

Adam Sarhan Market Quotes:

Learn How to Navigate The Stock Market

  1. “Never argue with the tape and always keep your losses small.”- -Adam Sarhan

  2. “Trade wisely” -Adam Sarhan

  3. “The market is just a reflection of collective psychology.” -Adam Sarhan

  4.  “Time is the friend of a successful investor and the enemy of lousy investor.” -Adam Sarhan

  5. “There is always that one person who beats the market. Be that person.” -Adam Sarhan

  6. “My research shows most people lose money on Wall Street because they make emotional, not rational, decisions.” -Adam Sarhan

  7. “There are two sides to every trade. Before you pull the trigger ask yourself what is the other side thinking?” -Adam Sarhan

  8. “For every tick there is a trade.” -Adam Sarhan

  9. “Learning how to trade stocks is easy. The hard part is overcoming your emotions and actually doing it in real-time.” -Adam Sarhan

  10. “Ask Yourself- Do I think and behave like a successful trader? If not, it will be almost impossible to win in the long-run.” -Adam Sarhan

  11. “Winning starts from within. Before you can win- you have to truly believe you deserve to win. Unfortunately, that is not easy for most people.” -Adam Sarhan

  12. “Most people spend their time studying markets and researching stocks. Instead, they should study themselves.” -Adam Sarhan

  13. “Profits are a function of time.” -Adam Sarhan

  14. “Time is your most valuable asset and information is your most valuable commodity. Use them wisely.” -Adam Sarhan

  15. “Forget everything you think you know and seek the truth. The truth in this business is the balance on your monthly statement. If you are not making money on your current path- find another path that works for you.” -Adam Sarhan

  16. “There are an infinite number of ways to make money in markets and in life. Your job is to find one that works for you. Just because a “system” works for someone else, doesn’t mean it will work for you. Your job is to find an approach that consistently makes you money. Period.” -Adam Sarhan

  17. “Do a daily inventory of your wants. Ask yourself,  and write down, What do you want most today? Then make sure your actions are aligned with your top want.”
    -Adam Sarhan

  18. “Align yourself with the market.” -Adam Sarhan

  19. “Trade on what you see happening, not what you think will happen.” -Adam Sarhan

  20. “Respect risk.” – Adam Sarhan

  21. “Filter out the noise and focus on what matters most: Making Money.” -Adam Sarhan

  22. “Being successful is a skill that you can learn.” -Adam Sarhan

  23. “The skills required to make money have nothing to do with formal education, intelligence, IQ, your background, race, religion, sex, or any other prohibiting factor. Anyone can learn how to be successful.”  -Adam Sarhan

  24. “Ask yourself, am I Investing or Speculating (a.k.a Trading)? Then find a “system” that works for you.” -Adam Sarhan

  25. “We live in the age of information. Successful people pay for good information and know how to use it.” -Adam Sarhan

  26. “Markets are always moving and will be around forever. Make money and respect risk so you can be around too.” -Adam Sarhan

  27. “The beauty of this business is that you do not have to trade every day, week, or month. In fact, you are free to enter and exit 100% at your convenience. Only trade when you have an edge (see the ball).” -Adam Sarhan

  28. “It is important to find balance. Force yourself to take off every now and then. Otherwise, you will burn out.” -Adam Sarhan

  29. “On Wall Street, your money works for you. Not the other way around. Become comfortable with this concept because it is foreign to most people.” -Adam Sarhan

  30. “Avoid self-sabotage at all costs.” -Adam Sarhan

  31. “You deserve success. Once you become comfortable with that idea, make the necessary changes (thoughts/actions) and it will follow.”  -Adam Sarhan

  32. “Keep things simple. People have a natural tendency (to their detriment) to get in their own way and over-think markets. ” -Adam Sarhan

  33. “When you find yourself praying that a market moves in a certain direction. It probably won’t. -Adam Sarhan

  34. “Value, like Beauty, is subjective and in the eye of the beholder.” -Adam Sarhan

  35. “Price is a function of perception (psychology). Technicals and fundamentals are tools used to help determine perception.” -Adam Sarhan

 

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04 Jun
Best Trading Tips, Blog, Psychological Analysis

The Last Economic Frontier 

I look at capital markets (stocks, bonds, currencies, and commodities) as the last economic frontier. For the purpose of this article, I’ll focus on Wall Street but the same concepts apply to other markets. It is the one place on earth where anyone can make (or loss) a fortune- regardless of their background, skill-set, formal education, natural physical talent, race, religion, sex, creed, or any other prohibiting factor you can think of.

You Can LEARN How To Make Money

The single best way to consistently (legally, morally, and ethically) win on Wall Street is to learn a set of skills necessary that allow you to do only one thing: Make Money. The good news is that anyone can learn these skills, providing they are willing to keep an open mind, work hard, and be flexible in their approach.

You Must Be READY to WIN:

Accomplishing this feat is simple, but not easy. It requires a great deal of hard work, dedication, tenacity, and most importantly introspection/personal growth. This heightened sense of responsibility is usually the biggest obstacle most people face. There are a myriad of reasons why people have a hard time overcoming obstacles in their life but they are outside the scope of this article. Suffice it to say, most people are not comfortable leaving their self-imposed comfort zone (most people tend to “blame” outside circumstances and as a result play the victim and not take responsibility for their life).  Becoming successful on Wall Street requires you to learn a set of skills necessary to make money but really be ready to push yourself past your comfort zone. How you think is a HUGE part of being successful in life and in the market. Take inventory of your thoughts. In order to win, it is important to think like a winner. Once you master this process you will achieve success beyond your wildest dreams.

No “Right” or “Wrong” Way:

One universal truth, in the market and in life, is that there are many ways to WIN. Unfortunately, most people fall in love with one approach and to their personal determent fail to grow because they spend all their energy bashing other approaches instead of seeking the truth. In short, you need to ask yourself what is more important, being right or making money? I hope the answer is obvious.

Your Most Important Task:

Your most important task is to make money in the market. Everything else is noise. Doing so does not happen overnight and it is much easier to learn alongside someone else than to go it alone. Find a reputable source, someone you trust, and learn from them. Another interesting universal truth, in the market and in life, is that people can look at the same facts and interpret them in many different ways. For example, the S&P 500 is trading at 1900 is that expensive or cheap? Just like beauty, value is in the eye of the beholder so your job is to find a set of rules you can follow which makes money in both bull and bear markets. Then your job is to be true to yourself and follow those rules to financial independence. Want more? Get exact buy and sell alerts on FindLeadingStocks.com
 

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12 May
Best Trading Tips, Blog, Psychological Analysis

Why Most People Lose Money In The Market- It’s human nature.

5 rules

 Immediate Gratification:

Profits are a function of time. By definition any trade that is exited with a profit requires a certain element of time. The problem is that most people have a natural tendency to seek immediate gratification at the expense of long term gratification. That is why most people lose money on Wall Street.
Think about a diet- why do most people struggle to lose weight? The answer is human nature. Most people do not have the willpower, or ability, to delay gratification (even if it is in their best interest).  So instead of going to the gym and experiencing short term pain, most people sit on their couch and eat chocolate (enter desert/snack of choice) and gain weight. The immediate gratification of eating chocolate is more powerful than an often immeasurable benefit of going to the gym and eating right. The same phenomenon plays out in all areas of life, especially on Wall Street.

Successful Investors Are Patient:

I see this phenomenon manifest itself everyday in the stock market. In theory, what should matter most is the absolute ROI, but unsuccessful clients are always looking for the holy grail and jump from strategy to strategy or portfolio manager to portfolio manager in search of immediate gratification. Years pass and they are always behind.
On the other hand, successful investors are patient and understand profits are a function of time. They are able to exercise patience and win in the long term. That is why I interview everyone before taking on a new client and only accept business from people who are not looking to get rich quick.

5 Steps To Becoming A Long Term Success

1. Make Rational, Not Emotional, Decisions – Do you have a plan to enter and exit your trades? Or do you just wing it? If you have a plan, write down your rules and make sure you trade your plan. If you don’t, or can’t, follow your rules, hire someone who can.
2. Respect Risk –Wall Street is not going anywhere. If you risk too much your emotions will take over and you will likely go broke. Always know where you are going to exit before you enter and how much you are going to risk if wrong.
3. Don’t judge your success one trade at a time – Losing money is part of trading. It happens to everyone. Once you learn to expect that will happen you can plan for it and get past normal pitfalls (giving up on your system after a few losing trades).
4. Think like a winner – Remember, winning starts within. How you think is everything.
5. Ask For Help- Making money on Wall Street is simple, but definitely not easy. Don’t let your ego get in your way of making money. Most people have a hard time asking for help. That’s just one reason why most people lose money on Wall Street. You don’t have to go it alone. Find someone you trust and are comfortable with and don’t be afraid to ask for help. Want more? Get exact (and early) buy and sell signals in leading stocks on  FindLeadingStocks.scom

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29 Apr
Best Trading Tips, Blog, Psychological Analysis, Technical Signals

Market States & 5 Market Cycles

Albert

Market States & Cycles
04.29.14

The stock market is constantly changing but the one constant throughout history is (has always and will always be ) human nature. The stories, stocks, centuries, asset class, bubbles, busts, change, but people don’t. That is why it is important to understand market cycles not just from a technical level but from a psychological level as well. If you develop or use a strategy that controls your risk and is built around how markets actually work you will do well on Wall Street. The hard part for many people is having the discipline to stay true to their strategy and actually follow it in real-time.

3 Market States: Up, Down, or Sideways

People, to their detriment, have a natural tendency to over-complicate most everything in life. Especially, difficult concepts that are not easily understood (e.g. Wall Street). At the most basic level there are only three directions any market or stock can move: Up, Down, or Sideways.

5 Market Cycles

Step 1 – Base
The first step before a trend begins is to see the market (or stock) build a base (move sideways). During the basing phase, the market is moving sideways between support and resistance. During the latter part of this phase, ideally the action will tighten up (almost like a coiled spring) and then at some point breakout above resistance (creating a new uptrend) or breakdown below support (creating a new downtrend).
Step 2 – Trend Begins
Ideally one would like to see the breakout occur on heavy volume which is a strong sign that large institutions are accumulating (buying) stock. Remember, it is important to note that price is primary and everything else (including volume) is secondary. Some people say you must have volume above X% in order for a proper signal to emerge but based on my research and experience, price is primary and volume criteria is secondary.
Step 3 – Normal Pullbacks
During the trend (up or down), it is very normal to see a breakout pullback and slightly fail initially (shake out the weak hands) then blast off again. Remember the market is counter-intuitive in nature and tends to fool  most people, most of the time. The general crowd tends to miss the first few breakouts and tends to buy after the move becomes “too obvious.” The smart money does the opposite- buys early and sells into strength down the road.
Step 4 – More Basing & Too Obvious Factor
As the trend (up or down) builds- the states rotate from trending to sideways and back to trending again (several bases develop within a trend). This is normal and healthy action as the trend develops, matures and eventually ends. After the trend matures, most people who doubted the move are now buying into it (fear of missing out). Thus creating more momentum and eventually the move becomes obvious and shows up on most technical/charting blogs.
Step 5 – Trend Ends- Tops/Bottoms
Remember that all trends eventually end which means traders (not long-term investors) will need to sell their stocks at some point. After a big move, up or down, fear builds; the smart (a.k.a. early) money is getting out while the dumb (late) money is getting “in.” This creates sloppy wide-and-loose action (after a big move) and typically suggests a top or bottom is close to (or in the process of) forming.
Rinse, Wash, Repeat- New Trends Begin
Once a top is completed (sideways action after a long uptrend) support is broken of that sideways consolidation and a new downtrend begins (go back to phase 1). The same is true after a long downtrend, the market bottoms, and a new uptrend eventually forms. Keep this mind as you buy and sell stocks. Ask yourself am smart, or dumb, money? Late or Early? What state is the market in (up, down, or sideways) and what phase of the cycle are we in. Want exact buy and sell signals in leading stocks? Join FindLeadingStocks.com
 

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