Simple Three Step Bollinger Band Strategy That Makes Money

Top professional traders all over the world use this system to trade. It works on any time frame but produces better results on the longer time frames such as daily, weekly and monthly. If used properly it can help you make money.

The first step in the system is identifying one of three specific candlestick patterns. There are over 80 Japanese candlestick patterns however, we are only interested in the strongest patterns. The strong patterns we are looking for are dark cloud cover, bearish engulfing patterns, bullish engulfing patterns and piercing lines. Each of these patterns need two candlesticks to form completely. The second candlestick is the most important and it must appear very strong.

The first thing we need is a strong candlestick pattern. A order should not be placed unless a strong candle stick pattern has formed.

The second step is the candlestick pattern must have a strong Bollinger band break out of the upper or lower bands. The first and second candle must break out of the upper or lower band strongly. If the rules are not met the trade set up should be ignored.

So the second thing we need is a very strong upper or lower Bollinger band breakout.

Rule one and two show a sign which indicates that the price wants to change. Either to collapse or advance. It only tells us that either the buyers (bulls) or the sellers (bears) are getting tired, giving up, or switching sides.

The rules also requires that the strong candle stick pattern should form were neither the bulls or the bears do not have full control over the price. This means one of the parties have become exhausted in the struggle to control the price movement.

So the third thing we need is a market showing signs of exhaustion where neither bulls or bears have full control over the price action.

If you do not have all three of these conditions it is too risky to place an order.

Using this Bollinger band system you can expect to trade five times in one month. You can set your take profit order up to ten times your stop-loss order. Your stop-loss order is best set at the previous candles high or low price.

I recommend that you practice in a demo account first. No strategy is one hundred percent right all the time. We are traders not fortune tellers. However, with proper risk management, and a solid exit plan it is possible to become consistently profitable trading currencies.

You are welcome to join our blog and community of experienced professional traders who love to mentor novice traders absolutely free of charge.To receive a free eBook explaining the system described here in full detail visit

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Types of Binary Options

Many types of binary options are available for trading and this may seem a bit confusing for new and even some experienced traders. You can choose the type or method you want to use depending on your trading needs. If you are an experienced trader you may choose various methods depending on the prevailing market conditions. The traders may place the trade after determining how the markets may react to external announcements, influences, trends, results and other specific conditions.

Popular methods of binary options trading

Digital option - This type of trading is commonly referred to as up/down and call/put option. In this method the trader places a call option if they believe that the price may end above the entry price after the contract expires and a put option if they believe the price end below the entry price. The various expiry periods that are available for trade include 60 seconds, 15 minutes, 1 hour, end of day, end of week and others.

After the trader places the trade, the platform monitors the trade automatically and exits at the specified time. You do not have to log into the system to complete this transaction. Email notification is send at the end of the closing session on the status of each trade. The status of the ongoing trades can be easily followed by the trader from the account portfolio page.

Touch option - This option has many types of varieties that include touch, no touch and double touch. In this predefined rates that are necessary to profit in the trade are indicated instead of the trader predicting whether the value of the underlying asset may increase or decrease.

You may predict a level that it may touch or not touch. The level that is predicted can be higher or lower than the current price of the asset. Purchase of options can be done at the weekend after the market closes. The asset then trades during the week and if it passes over the specific level on Monday then it is declared a win. No touch pays when the defined level is not reached and in double touch two levels are defined and pay is possible when either of the level is reached.

60 second option - This is fast becoming a popular method of trading where the trade expires in 60 seconds. The advantage of such trading is that when the asset is moving in a particular direction the trader may place successive trades to maximize profit.

Boundary options - This method is referred to as range or tunnel option and is similar to the touch option. Two levels are defined in this method known as upper and lower and the trader makes money when the asset stays within the level.

The trader may choose different types of binary options depending on the prevailing market conditions to maximize profits.

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A Day Trading Technique I Use Myself

Summer's here... time to dust off and fire up the old grill, slather yourself in sunscreen and squeeze into that bathing suit that somehow shrunk two sizes over the winter.
Although we've technically got several weeks before the calendar says so... it's here.

The kids are home from school, campgrounds around the country are booking out quickly and the stock market is about to go into a slumber... and perhaps fall out of bed.

The upside potential in the S&P 500 for the summer is pretty slim. In fact, we've been preparing for a healthy and long needed correction of 10 to 15% before the autumn begins (after the correction we could see a nice strong continuation of the bull market).

So, with that in mind, over the course of the past few weeks, we've covered an array of dividend paying stocks which can act as somewhat of a safe-haven in the event of the coming correction. But what do we do during these lazy crazy days of summer?

We are prepared for the worst, and that's great, but how do we take advantage of the low-volume, low opportunity months ahead? With some day trades of course. Imagine doing two trades a day, in-out-and-done before 11 am while sitting poolside? Sounds like summer to me!

Since day and swing trading is very time sensitive, we won't be sending trade recommendations to your email inbox. By the time you read it, it's already old and useless.

However, I will share with you a technique I personally use that has been my winning strategy in day and swing trades for years. In fact, I use the same strategy when investing for my mid and long-term portfolios.

So you can employ these tactics every morning, or whenever you feel like trading, and be done with your day before the pretty waitress brings you your club sandwich and diet soda.

It's all about the pre-market activity

Each morning around 8:30 am eastern time, I open my trading screen, visit several financial news sites and have a look at all pre-market activity. I'm specifically looking for stocks that are up 15% or more in pre-market... or are down 15%+ in pre-market

Once I find these (and there's usually a few of them every morning), I'll go to the stock's chart and news feed. What I'm looking for is the following:

• News that is moving the stock. As long as it's not a buyout offer, the stock will most likely be tradable. If there's no news out and the pre-market is up or down 15% or more, I stay away.

• A chart that shows movement the day before. You want to see a chart showing the last hour or two of the previous session had the stock ripping either up or down, the same direction as the pre-market activity. This shows us that there are people already in the stock on the news before we make our position. (important)

Now that we've found our two or three stocks that are up, or down 15%+ in pre-market, with news out that is not a buyout offer and a chart that shows people getting in or fleeing in the last two hours of the previous session... we have our potential winners.

This is where we do the exact opposite of what our good-sense tells us. We will short sell the stocks that are up big in pre-market, and we will go long the stocks that are getting crushed pre-market. Why?

Those charts we looked at? If they show people rushing in, or rushing out of a stock in the previous session, that means there are folks already nicely in the money on those positions. The stocks that are up significantly in pre-market have shareholders who are likely to sell within an hour of the open to lock up their gains. These are stocks we want to short as soon as the sucker buyers at the opening bell slow down.

The stocks that are down significantly in pre-market? There's a very strong chance that folks are short from the day before, and plan on covering and locking in their gains within the first hour or so of the market. These are stocks we want to buy as soon as the panic sellers at the opening bell slow down.

Usually by 10 am or so, the charts begin changing course. This is around when you make your position.

So while instinct tells us to buy stocks that are up in pre-market, and sell stocks that are down, we want to do the very opposite, as long as the news is there, the chart is there and we time our entries and exits properly we have a good chance at making some money in a short amount of time.

This day-trading technique is almost identical to our long-term investing thesis. Buy when others are selling, and sell when others are buying.

Here's to good investing!

Article Source: Here

I Still Haven't Started With Live Trading Yet, Because I Am Afraid to "Click"

Relatively often, I find myself in situations where beginning traders are telling me that they have done all the necessary work such as backtesting and profitable papertrading, but they still can't find the courage to click "live". Therefore I will try to summarize a few pieces of advice and tips in today's article.

First of all, I would like to repeat that this advice is only for those who really underwent the necessary preparation work, i.e. they have done backtests to verify functionality of their system and have done papertrading for some time and were able to trade profitably for a couple of months (alternatively they have done only papertrading, i.e. without backtests, but in that case for a longer period of time and more precisely). Without these basic steps, the beginner doesn't show a diligent and serious enough approach to trading and they absolutely shouldn't click "live", because they aren't ready enough!

As long as the beginner fulfills the requirements above, then, based on my experience, there are three types of fear to "click", which I will try to describe more closely.

Fear no.1: I am afraid to lose money

I think that in connection with trading, this is one of the most common and most natural types of fear. Nobody wants to lose money and, for the vast majority of beginners, the concept of occasional loss that is part of a long-term profitable trading, is difficult to take in. Up until now, we were used to getting some kind of reward for every activity - in trading, this type of thinking is failing and it is even getting worse because of the factor that after a few hours, days, or even months of activity the outcome can be loss. This is why the fear of loss of money is completely natural and not always wrong. This fear has its positive side, because it helps conscientious individuals and it is pushing them towards better preparation and to make an effort to not underestimate anything.

And thus, it is important to realize if this is the fear that is stopping us to "click". If the answer is 'yes', then it is important to openly confess to yourself if possible loss per trade represents a considerable amount (i.e. amount that we aren't willing to lose, because in our normal life it represents a lot of money) or if it is an amount that doesn't mean anything significant and a factual loss of such amount won't be a major problem.

If we are talking about the first option, i.e. situation when possible loss from trading is unbearably high and it represents a lot of money, the advice is rather simple: Either you are undercapitalized, or you risk per trade more than what we are willing to lose and bear. In such case it is necessary to increase the account or move to a cheaper market (with lower volatility), alternatively lower timeframe - to achieve decrease of our stop-loss to a level that won't be as painful. Or alternatively to do both (i.e. slightly increase the account and through a change of market or timeframe decrease the risk per trade).

If it is the second option, then the fear of loss of money probably isn't the real problem. Maybe you are just telling yourself that this is the main problem and that the fear of loss of money has the biggest influence on you - but it can be just a conscious belief, which is far from what is happening in your subconscious. Then the real cause can be one of the other types of fears.

Fear no.2: I am afraid to fail, I am afraid I am not good enough

This type of fear is more serious, because it is connected to subconscious models resulting from failures and lack of success in the past (which lead to lower self-confidence).

In the past if we suffered some substantial failure (even deeper, in our childhood) which could negatively influence us, or if we failed in something essential (effort to sustain a business, effort to make a significant change, etc.), our self-confidence can be considerably broken and our subconscious can slow us down from any other effort in order to protect us from another possible disappointment.

The advice here is substantially more difficult and if there is a deeper problem, it can be helpful to consult this with a professional psychologist who can help to find and eliminate such subconscious blocks and fears.

Personally, I have tried various types of meditation and other alternative ways for similar types of subconscious fears, but I respect that not everyone is willing to try them.

Yet I think that the best way is simply to click and live through the possible first loss in the market - to see that there is nothing horrible about it!

Broadly speaking, there are only two possibilities to "force" yourself into this first click.

The first one is to plan and prepare everything in advance. The better and more detailed planning of our first click, the higher the probability of its realization.

First of all, set yourself a target that for example next week (don't postpone it too much) at a particular day and time you do that first click. For example, you can say that it will be on Wednesday, which is for some reason the calmest day for you and that it will be between 4 and 6pm, the period you have done your training on. But, ideally, you will do that first click in the first 30 minutes after the market opens and you definitely take the first trade according to plan as soon as it occurs.

Afterwards, for the rest of the week, visualize that "Wednesday" (or you can choose any other day) before you go to sleep. Imagine that the day has come, imagine in detail how you sit in front of the computer and you patiently wait for a trade according to plan and when it comes, you click on the mouse without any hesitation. Experience and envision your feelings (it doesn't matter what feelings you have, don't think about them too much), imagine both possible scenarios - that the first trade will be both loss and gain. The day before your set date, stop thinking about anything and when that day comes, just calmly do what you have visualised a few days ago. You will see that it isn't as bad as it seemed - once this first experience is behind you, the other ones will surely be simpler and you will slowly get used to it!

The second option sounds a bit crazy, but it works as well. Now go to your computer (or at the earliest possible moment). Open the chart and click BUY or SELL (completely blindley, it is absolutely insignificant if you buy or sell), count calmly to 3 - and then close your position. And it is done. Your first trade is behind you; you clicked. Nothing terrible has happened, you are alive and healthy, you survived, and it wasn't difficult at all! So why so much fuss about it? It was a piece of cake! Done; now you just have to repeat it based on your signals according to your trading plan, and you are where you want to be. There is no need to make it complicated.

Fear no.3: I am afraid of change

The last type of fear may sound a bit strange, but it also has its own reason and explanation.

The human brain doesn't like change. The human brain prefers the past (which it likes to idealize), it declines to its deep-rooted stereotypes (this is why most of the people like to run on "autopilot") and it refuses any kind of change. Just try to imagine how you would react if your boss arrives to your workplace tomorrow and exchanges people amongst departments and also changes their job descriptions from last week.

Trading is a change - a significant change. It can mean anything (a successful future isn't guaranteed) and whatever outcome will be, it can sound terrifying. If we lose, it can be an unpleasant change to worse; if we succeed, at present we think that it will be great to start a new dream life - but in reality we can't really imagine actual steps towards such a considerable life change, because in that current moment such a big change is rather dramatic for our brain! And so, our brain can subconsciously sabotage us to keep us as long as possible in our current comfort of apparent certainty that at least we know what tomorrow will bring. The brain loves its certainties (even the bad ones and horrible ones - for many people unsuccessful and depressing relationships are still better than none at all, and rubbish and hated jobs are still a better solution than to take a risk, leave a job and search for a new one) and subconsciously it can block many of our efforts to change. For example, it can constantly block our efforts to click "live", which could be understood as a first step towards possible change.

So, what to do in such a case? Simply initiate in our life as many small changes as possible, which slightly "derail" our routine stereotypes and help us gain more self-confidence to click.

Choose a different, new route to work from tomorrow on.

Do something you have wanted to do for some time now, or do something crazy this weekend, like bungee jumping, go-carts, etc.

Try a meal you have never tried before and go to a restaurant you have never been to before.

Do something, anything, that changes your usual rhythm and stereotype for a couple of days or weeks. It is necessary to train your brain for changes, to teach it new flexibility. Then it should be considerably easier to click, because once your brain gets used to a repeated disruption of stereotypes, it will be much better prepared for a change - and so for your first click.

These are today's advices and tips. Don't be afraid to combine a few of them at the same time. I wish you good luck and courage!

Happy Trading!

Article Source:Here

Strategies in Binary Options Trading

To start making money with binary options trading, it is important to have certain procedures that will help in capricious business sector environment. By and large, such approach is normal for a wide range of budgetary markets. Procedures in alternative exchanging exist for brokers as well as for financial specialists since it is clear that binary options methodologies give a chance to get steady salary.

These methodologies posture as complete frameworks which incorporate exchanging signals as well as standards of cash administration, hazard and exchanging brain science. In spite of this, dealers are constantly more intrigued by exchanging signals as the lay relies on upon store, broker's character and his/her mental condition.

All systems in alternative exchanging can be separated into basic and convoluted. Basic ones can be utilized even on essential stages while troublesome ones as of now utilize various specialized examination components and pointers.

Simple Binary Options Methodologies

Basic techniques are gone for utilizing least arrangement of instruments for achieving the objective which is for our situation - pay. That is the motivation behind why such systems are suitable for novices. These days these systems are utilized all over as having the right approach, such procedures have an opportunity to wind up extremely productive.

A standout amongst the most straightforward frameworks are: news exchanging, pattern exchanging, channel exchanging and so on. Their fundamental thought is to utilize one instrument with the assistance of which brokers will have a chance to foresee the anticipated "conduct" of citations of either resource.

As a case, channel exchanging methodology is broadly utilized by merchants from everywhere throughout the world. Its prevalence came not on account of its straightforwardness and accessibility to dealers. But since, having the correct methodology it turns out to be exceptionally productive for both tenderfoot and propelled merchants.

For the most part, all the aforementioned ideas are named win-win procedures yet with some percent of danger. These frameworks don't give 100% certainty however they do work and it is for all intents and purposes demonstrated by a great many brokers.

Profitable Binary Options Systems

Gainful procedures in choices exchanging are sure frameworks which are clear just to proficient brokers. Obviously, in such techniques, pointers and other diagnostic frameworks that require certain information and abilities are utilized.

Profitable techniques showed up a consequence of straightforward systems improvement implying that they are redesigned and modernized. Yet nobody can say that troublesome systems are dependably win-win. They can be a misfortune for the individuals who don't see how they function or be misfortune making all alone.

Binary options 24 here we post the most recent news and also data about individual specialists, winning techniques, exchanging flags and tips.

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What Type Of Experience Do I Need To Have To Trade Binary Options?

People want to know what type of experience do you need to have to trade binary options. Simply, you predict if the market is going up or is it going down, and if you predict correctly, you will gain anywhere between 70%-90% profit. Easy, right? Because of the fast profits, and huge gains, binary options has a global audience wanting to cash in on all the action.

Every traders goal should be to capitalize on their returns. Implementing an effective strategy and applying straightforward techniques, will help to identify certain signals in the market that guide you in trading binary options. In order to do so, brokers will usually have demo accounts for you to practice trading.

1. Having A Strategy

Binary options trading can present several risk factors, and to decrease them, every successful trader has a master plan. Minimizing your risk is very important. As a new trader, it's highly recommend to focus on one asset. This will allow you to put your center of attention on building your strategy. Steadily trading will help you see the movement of your asset to help predict the direction and will become obvious.

2. Trend Strategy

This strategy is great for beginners. In your demo account, practice placing trades when you see a trend line forming. Basically, your asset is either going up or it's going down. Get comfortable placing your trades. For example, in demo mode, your broker might start you out with $10,000 to practice trading, but when you are ready to go live, you are going to start out with $1000. Practice using increments that our going to mirror your results with real money and see if you can profit. So if you start with $1000, then make sure your trades are between 2%-5% of your initial investment.

3. Straddle Strategy

During market volatility, traders can increase there chances for profit, but you need to keep your eye on the market to make great predictions. For example, the market has been declining, and it's about to go the other direction. Place your trade with a call option when it's down, and then when it is up, place your put option. This takes practice and is a strategy used by many.

Even though you don't need to have a degree in economics or have a license to trade binary options, you still need to practice your craft everyday. If this is something you are wanting to do, you need to take it serious. Do your research, practice on your demo account, and make realistic trades that reflect your trading when you go live.

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Questions First Time Investors Should Ask Before Investing

It is easy to find people's opinion on how to invest in the stock market as everyone has a different angle on what to expect in the stock market at every point in time, but most of the time people's opinion may be very confusing. The most common problem that new investors do have is how to determine good investments from the bad ones, what to invest on, what time to invest among others. Some of the questions that you need to answer so as to make a good decision when you want to invest are highlighted below.

Is This a Good Time to Invest in Stocks?

On the off chance that you are taking a gander at money markets amid a lofty decrease, you may think it is a terrible time to begin investing. On the off chance that you are taking a gander at it when stocks are reviving, you may think it is a decent time.

Neither one of the times is fundamentally great or terrible in the event that you are investing for the long haul (10 years or more). Nobody can anticipate with any level of assurance which way the share trading system will move at any given time; yet over the long haul, stock markets has constantly moved higher. Each bear advertises is trailed by a buyer market (when stock costs rise). Verifiably, positively trending markets have endured any longer than bear markets, and the additions of buyer markets have more than counterbalance the misfortunes in bear markets

How Much Risk Should I Take?

A standout amongst the most essential fundamentals of investing is the cozy relationship amongst risk and returns. Without risk, there can be no profits. You ought to will to accept more risk on the off chance that you are looking for more noteworthy returns. In that regard, risk can be something to be thankful for, yet just in the event that you take into consideration adequate time to let the inescapable market cycles happen. By and large, in the event that you have a more drawn out venture time skyline, you ought to will to expect a more noteworthy measure of risk, on the grounds that there will be more opportunity for the market to work through the here and there cycles. Generally, understanding financial specialists have been compensated with positive long haul returns.

New investors are regularly encouraged to put fundamentally in common money, which can give moment enhancement, offering the most ideal approach to lessen risk. By putting resources into a couple of various shared assets speaking to various resource classes, (for example, expansive development stocks, global stocks or bonds), you can lessen unpredictability significantly promote without yielding long haul returns.

On the off chance that you are beginning an investment program by investing incremental measures of cash on a month to month basis, you will profit by dollar cost averaging. When you invest an altered measure of cash on a month to month premise, you get some share costs at a higher cost and some at a lower cost because of market changes. At the point when the market decreases, your settled dollar sum will purchase more shares. After some time, the normal cost of your shares ought to be lower than the present market cost. By utilizing dollar cost averaging, your drawback risk will be alleviated after some time.

What Is My Investment Goal?

The most vital question to consider before making any invest is, "What Is My Investment Goal?" Your ventures will contrast boundlessly if, for instance, you are attempting to spare cash for retirement as opposed to attempting to spare cash for an up front installment on the house. Things being what they are, ask yourself, "Is this venture prone to help me meet my objective?"

What Is My Risk Tolerance?

If your investment objective is to profit as would be prudent and you can endure any hazard, then you ought to invest in the National Lottery. Putting resources into lotteries, be that as it may, practically promises you won't achieve your venture objective. There are speculations for each level of risk resilience. But if you are not a high-risk taker, investing in long-term investment is the key.

What Happens if This Investment Goes to Zero?

Among the 12 stocks in 1896 stock list, only General Electric is still in operation, the other eleven firms in the first record have either gone bankrupt or have been gobbled up. There is a genuine plausibility that any investment you make could go to zero while you claim it. Ask yourself, "Will I be monetarily crushed if this speculation goes to zero?" If the answer is yes, don't make that venture.

What Is My Investment Time Frame?

As a rule, the more extended your investment time allotment, the more risk you can take in your investment portfolio since you have more opportunity to recuperate from a mix-up. Likewise, in case you're putting something aside for retirement, and you're decades from resigning, putting resources into something illiquid (like an investment property) may bode well. "Does this venture bode well from a planning perspective?"

When and Why Will I Sell This Investment?

If you know why you are putting resources into something, you ought to have an entirely smart thought of when to sell it. On the off chance that you purchased a stock since you were expecting 20 percent income development for each year, you ought to anticipate offering the stock if income development doesn't live up to your desires. On the off chance that you purchased a stock since you enjoyed the dividend yield, offer the stock if the profit yield falls.

Who Am I Investing With?

It is extremely hard to judge the character and capacity of anybody in light of a two-passage portrayal accessible in an organization's yearly report or a common store outline. However, you ought to at any rate know with whom you are entrusting your money. What is their past record? Things to hope for are long fruitful track records and good dividend and turnover.

Do I Have Special Knowledge?

A celebrated investment expert feels that normal individuals have a tremendous favorable position over investment experts in fields where they work in light of the fact that no investment professional will ever know more around an industry than somebody who works in it. Ask yourself, "Am I putting resources into something I know something about, or am I putting resources into something that some specialist know something about?"

I couldn't care less how great something sounds. In the event that I don't totally see how it functions, I won't put resources into it.

In the event that an investment can't be clarified obviously, it implies one of two things:

The individual clarifying it doesn't comprehend it either, or there's something about the investment that the individual is attempting to stow away.

On top of that, one of the greatest keys to investing admirably is adhering to your arrangement through the good and bad times.

That is difficult. Indeed, even the best investment methodologies have enormous down periods that make you reconsider. Adhering to your arrangement in those extreme times requires a practically religious-like conviction that things will pivot.

Furthermore, the best way to have that sort of conviction is to comprehend why you're investing the way you are and what every bit of your arrangement is accomplishing for you. Without a solid comprehension, you'll more likely than not safeguard at the main indication of inconvenience.

Why Do I Still Own That Investment?

It is a smart thought to intermittently look through your investment portfolio to ensure regardless you need to claim your stock. Offering an investment for a misfortune or offering a major champ is exceptionally troublesome. Be that as it may, the greatest distinction amongst beginner and professional investors is that professional investors don't have passionate ensnarement with their investment and can strip themselves of their investment without kicking themselves if the investment keeps on picking up esteem.

Should I Be Managing My Own Investments?

It is extremely difficult for beginner investor to perform well than a professional investment expert. If you don't have sufficient energy or slant to deal with your investment, you ought to think about paying an expert to do it for you. Every investor wants to make profit, so there is no harm in trusting your investment in good hand.

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How to Pick Profitable Stocks - Why Investors Make Mistakes

Compare the average investor's returns around the world to the average Wall Street firm's returns. I think we would all agree that the average Wall Street firm is making the lion's share of the money while the average investor is either losing or not making much at all. Why? Because, they know how to pick stocks!

Think about what the average investor around the world does in the markets, they "buy stock". Now, think about what the average Wall Street firm does, they "sell stock". Hmmm... One group is selling and making strong returns each year and the other, who is buying, hardly ever achieves their financial goals. Understand that I am not at all suggesting the average investor should stop buying stocks and start selling. What I am strongly suggesting is that the average investor needs to start "thinking the markets and investing" like Wall Street does.

Let's think about how people around the world are conditioned to invest/trade. The education in grade school, high school, college, and graduate school is all the same. When taught how to pick stocks, here are the rules we all learned during our peak conditioning years:

1-Make sure it's a good company

2-Make sure the company has a good balance sheet

3-Make sure the company has good management

4-Make sure the company has good earnings

5-Make sure the stock price is in an uptrend

When all these items are true, "buy the stock". This is what everyone is conditioned to do at every level of education from a young age. Let me ask you, when all these items are true, where do you think the price of the stock is? It is hardly ever going to be cheap when this "must have" list is present. Most of the time, the stock price will be high.

Now let's consider the basic lesson of how you make money buying and selling anything. The most profitable companies in history have mastered the art of buying at wholesale prices and selling what they bought at higher, retail prices. They simply repeat this process over and over and over. Think about the people you know who are smart shoppers when buying anything. They cut coupons, look for sale and negotiate for lower prices. This is also what our parents try to teach us during our developmental years.

The major issue here is that how we are conditioned to buy and sell in every other aspect of life is 100% opposite from what we are taught regarding how to pick stocks. When buying and selling anything in life outside of the trading and investing markets, we all try to buy at wholesale prices and sell at retail prices (homes, cars, whatever... ). When buying and selling stocks for example, most people buy at retail prices and sell at wholesale prices. The average investor spends their life scratching their head because they can't make this concept work, while the Wall Street mind laughs all the way to the bank. What happens each day in the markets is a massive transfer of accounts from the people who don't have this basic understanding into the accounts of those who do.

To understand exactly how this transfer of accounts happens, you first need to understand exactly how market forces work. Would you like to know where price in any market is going to stop falling and turn higher or stop rallying and turn lower? In other words, would you like to know where the market is going to turn, before it turns? Here is how it all works... The movement of price in any and all free markets is a function of pure supply and demand. Low risk, high reward and high probability buying and selling opportunity is present at price levels where this simple and straight forward equation is out of balance. Meaning, price always turns at price levels where supply and demand is out of balance. Learning to identify a supply and demand imbalance on a price chart is the key to knowing where price is going to turn next and, therefore, knowing where and when the next trend is going to begin. Let's review a price chart to get a basic understanding of how we quantify supply and demand as this will lead us to our objective opportunities for low risk gains.

Notice price level "A". For a period of time price was stable, suggesting supply and demand is in balance (equilibrium) at that level. Once price moves higher from "A", it is clear that there was no equilibrium at "A". In fact, we can now say that price level "A" represents a major supply and demand imbalance. We know this to be true because the only reason price moves higher from "A" is because there was much more willing demand than supply at "A", it simply took time for this unbalanced equation to play out. You don't need a technical indicator or some professional to tell you this; it's simple logic. "B" represents the first decline in price to the objective demand level which is where we find our lowest risk/highest reward buying opportunity as we expect price to turn higher from this point.

"C" is just the opposite. It is a price level where objectively, supply exceeds demand. For a period of time price was stable at level "C", and then there was a sharp decline. The decline tells us that there is much more supply than demand at "C". "D" represents the first time price revisits the objective supply level which is where we want to sell or sell short as we expect price to turn lower at this point.

Wall Street (the consistently profitable trader/investor) knows how to pick stocks. They simply buys at demand (wholesale) levels and sells at supply (retail) levels. For reasons mentioned at the beginning of this piece, the average trader and investor buys at supply levels and sells at demand levels. This is why Wall Street or the Wall Street mind has such an easy time gaining profits and the average investor doesn't. Now you can understand exactly where those profits come from. The reason the average investor never considers what I am suggesting in this piece is because they are blinded by the strong illusion that how we buy and sell in the trading and investing markets is somehow different from how we properly buy and sell anything else.

This illusion and misconception is single handed responsible for the massive transfer of accounts from those who are blinded by it, into the accounts of those who understand it. Simply put, how you buy and sell things in every other part of your life, grocery shopping, cars, homes and so on is EXACTLY how you should be buying and selling stocks and any other markets you may trade or invest in. There is NO difference in the proper action. Buy low, sell high and begin to smile at your finances just like Wall Street does.

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Greed and Fear: Common Stock Trading Traps and How to Avoid Them

Greed and fear are the two dominant emotions that affect the stock market. Although there are many other factors that influence the change in stock price, these two emotions are the underlying cause for the unpredictable fluctuation of stock price. As emotional creatures, humans make trade decisions all the time based on their feelings about the given market conditions. However, trading decisions influenced by emotions of greed and fear and stock trading success are two things that generally don't go hand in hand.

So how do these emotions really influence the individual traders decisions? More importantly, how can a trader avoid emotional trading?

Holding a stock in fear as it drops in price is a classic way traders lose money.

Say the typical trader buys a stock and it slowly goes down for a few days after the purchase. The trader is a bit worried but he still keeps his composer because he is certain that the stock will come back up. He holds for a few more days and the stock continues to inch downward. At this point the trader has lost a large percent of his original position.

Now the panic starts to kick in...

The trader begins to panic but he doesn't sell off because this is too much of a loss to bear. He can't afford to lose such a large chunk of his portfolio especially since he thinks the stock will come back up any day. The trader is praying that it will bounce back up just enough so he can at least break even. Yet as he clings to his position in fear, stock continues to fall. Finally he sells the stock partially out of fear that it will drop even lower and also because he can't bear the pain of holding the failing positions anymore.

This is a prime example of how the fear affects traders. Holding onto a stock because you have a hunch that the price will bounce back up is a dangerous way to interact with the stock market. Because of the markets unpredictable nature, you can never be completely certain of what might happen next.

So how would the greed influence this same unfortunate trader?

Keep in mind that after the trader lost such a large sum of money, he wants to earn it back as quickly as possible. Eager to find opportunities to make the most money back to cover his loss, he searches for riskier stocks. After running some scans he spots a penny stock that is moving ten, twenty, even 30 percent every day. With moves like this the trader figures that he could make back the money and more in the next week.

This particular stock's price pattern is extremely volatile and sporadic. The trader has no way to gauge where the price might move next. However, the trader still impulsively takes a position while holding onto the belief that the stock will make him a fortune. The trader is completely engrossed in the prospect of making a large sum of money in such a short amount of time. Because he was so eager and impatient, the trader had placed his trade without assessing any of the safer, more predictable stocks.

Nevertheless, the stock does not make him a fortune. The stock abruptly reverses downward in the next few days.

These are two classic scenarios of how many traders play the market. They let their emotions get the best of them and their trading success suffers as a result. Making trading decisions influenced by greed and fear will never produce profitable results.

So how do you take the emotions of greed and fear out of trading? The answer is simple. Lay out a solid strategy and stick to it.

This of course is often easier said than done. However, trading in a strict and systematic way limits the emotional element of trading significantly. Disciplined trading according to a plan is the antidote to emotional trading.

As mentioned before, trading based on predictions and emotion never leads to a profitable outcome. This is why sticking to a strategy is so important.

Stop-losses in particular are extremely important components in the strategy. When a stock hits your stop-loss it is extremely tempting to ignore it thinking a reversal is right around the corner. However, the truth is that you just don't know if it's going to go up. When the stock hits your stop-loss, simply step back and take you position out of the market. If you made some profit off of the stock then that's great. If you lost some money, just wait and see if you get another buy signal from the stock and step back in.

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