The What’s New at Stock Trading Warrior Newsletter brings you stock trading news, analysis and tips. In this month's newsletter you'll find information and tips on the following:
- The Stock Trading Warrior's Guide for How to Survive This Market
- STW Comedy Corner
- Pack Your Bags for Las Vegas!
- Stock Pix - Hot or Not?
The Stock Trading Warrior's Guide for How to Survive This Market
Ever since the big drop in the SPX in August the markets have been very difficult to trade successfully. Mainly, the issue is the extreme volatility and the insanity it breeds. The problem for mid-to-long term traders arises when the markets get extremely volatile and they’re not trending. This is a discussion about how to interpret the aspect of market volatility and two suggestions for how to handle it.
Taking a look at the $SPX along with the ATR or average true range really gives a good picture of what happened over the last six months. Take a look at the ATR and notice that it basically doubled during the month of August. This means that the average price range per day more than doubled from 14-15 to as high as 35. It's stayed in a higher range between approximately 28 and 35 which is at a volatility rate the highest it’s been in a few years. The last time the ATR was as high as it is now was early 2009 after coming down from an even higher rating during the crash of 2008.
Here are two good suggestions for how to handle this kind of market when it presents itself:
The first suggestion for trading in a volatile market is to trade smaller positions with shorter time frames and have stop losses in place. Interestingly, a good types of stocks to consider if you're comfortable with shorter hold times are
buying penny stocks
- not the ones spawned by the devil to drain your account of capital. But, good, solid, well-known and low-priced stocks that move in large enough percentages so as to capture a gain. Use a strategy that you understand well using an indicator that you like using. Use stop losses to capture short-term gains in the form of a trail stop or a stop at the prior day’s low for a stock in a short term trend.
The second suggestion is what I mostly did during this volatile market and that is to stay in cash. After the first big, volatile reversal I became unwilling to give up more of my gain percentage for the year, and I mainly kept my money in cash. (And believe me, this took extreme discipline.) The question then becomes - when does one get back into the market? The answer for me was based on looking for a recent high of the ADX (7-day) on a chart of the $SPX which occured on October 21st.
Given what I've shared above, remember that the ATR is still high and that’s not fertile ground for a true rally. Any trading should be done with caution and positions should be closely watched.
STW Comedy Corner
Why did God create market analysts?
In order to make weather forecasters look good!
This looks good!
Reminder about The Traders Expo
in Las Vegas, NV
November 16-19, 2011
This month is The Trader’s Expo at Caesar’s Palace in Las Vegas, NV, November 16-19, 2011. Most of the event is free to traders and you can register online to attend. There are some paid events that you may participate in that are longer, more in-depth workshops with top traders. Those events run from $195 to $695 and the early bird specials are extended through Monday, November 7th, 2011.
Even if you can’t physically attend, The Traders Expo provides free access to some live webinars and other good videos if you register on their website.
For more information visit The Traders Expo website.
Stock Trading Warrior Pix
Hot or Not?
This one's HOT! Is there any reason why a postal stamp service company is a stock that's surging and in a rough market too?
Since the buy point identified using the ADX Double DI Strategy, STMP has gained 38% over the last two months in a truly difficult market. Using the strategy's setup, the entry price was $20.55 which presented itself at the early stages of the upward trend. That, combined with clear signals of price strength are what can make a stock hot.
When the market shifts into a rally, the ADX Double DI Strategy described in the ebook below can help you identify the biggest and the best stock market gainers.
Click here for more information about the ADX Double DI Strategy ebook.
If you have any stock trading questions at all, please submit them on the
Stock Trading Warrior contact page.
Look for next month's newsletter for more current stock market news and analysis.
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