Stock Market Trading Tip

The Most Comprehensive Guide for finding the best Tips These are 26 of the most relevant and important pieces of advice that must become foundations in your trading arsenal.

With 17,000 plus stocks - countless stock picking strategies, stock picking newsletters, stock market gurus, etc...? Where does a trader go for stock market trading tips? Please keep in mind tips in this case are time tested techniques and methods to put all the odds in your favor. This is not a guide with tips like I heard "ABC Corp is going to buy CBA Corp". 99% of the time those are wrong and the 1% they are right is called insider trading. Time to share the tips that all the Pros live by and that consistently make money.

1. Stock Market Trading Tip

Plan Your Trade and Trade Your Plan

"Don't worry about where the prices are going. Worry about what you are going to do when they get there." Richard Dennis

Never turn on your screen and say what looks good today. You need to have a multiple stock candidates that you would buy or sell short if they reach your trigger price. Let the stock come to you. Have a previously chosen entry price that when it is reached you buy the stock. Next you must have multiple exit strategies.

What price -initial stop loss- will you sell at if stock starts going down (how much or what percentage of your investment are you willing to loose?

How will you take your profits? What price will you sell if it goes up? Will you sell half at one price and then the rest at a higher price?

By how much will you trail your stop? Meaning if it goes from $50 to $60 and turns around- will you sell once it gives back 2%, 4%, 5% etc... when will you sell to lock in your profits?

Will you add to your position if it goes up? If so at what price?

Remember you can't control prices - only your reaction to those prices.

2. Stock Market Trading Tip

The Trend is Your Friend

75% - 80% of all stocks move in the overall direction of the market. Why would you ever bet against those overwhelming odds? Don't try to fight the trend (market), but rather let the market help you make you money by buying stocks trading in the direction of the general market.

Careful attention needs to be given to the support and resistance lines. These lines are also called trend lines. Here are seven reasons why the trend can be your friend in investing:

3. Stock Market Trading Tip

Use a Trailing Stop- Secret to Never Giving Your Profits Back

A Trailing Stop is a Stop-Loss Order at a percentage or dollar amount below the market price for a long position. It locks in profits and saves your financial life if the market turns against you. The trailing stop price is adjusted as the price fluctuates. If the stock price doubles your trailing stop will sell once the price falls back a dollar of percentage from the new high.

If you had a 10% trailing stop and your stock went from $50 to 70$ and then fell the trailing stop would sell your shares at 43 ($70 - ($70 x.1) = $63. If you had a dollar based trailing stop of $6 and the stock hit $70 and retreated it would sell at $64 ( $70 - $6)= $64.

4. Stock Market Trading Tip

Keep a Trading Journal.

Keep a written journal of your trades. Analyze why you failed, succeeded, what was different between those trades? Why did you enter the trade? What happened that you didn't expect? Where should you have exited? Where should you have entered?

5. Stock Market Trading Tip

Paper Trade.

DO NOT open a brokerage account and start trading with real money Open a Paper Trading Account. Don't make mistakes with real money. Sign up for all free trading newsletters and trading websites. Read every book. Plan your trade and trade your plan. Create a trading plan. When you get into a stock you must have reasons why. Where will you get in and out? Develop trading rules and tape them on your monitor.

Once you have made at least 10 or more successful trades in a paper trading account and are successful with your trading plan then open a brokerage account.

6. Stock Market Trading Tip

Buy high sell higher. Sure buying a stock when it is low and selling high is ideal, but trading is based on probabilities. A stock is low priced for a reason. No One Wants It. When a stock is going up it means there is demand. Maybe the new product is doing great, earnings keep increasing, they are expanding, management is increasing profit margins... whatever the reason people want to own it. When we trade we deal in probabilities. Most likely a low priced stock will stay low or decrease and a high priced stock tends to keep climbing. Don't buy stocks under $5. Remember the big boys- mutual funds and hedge funds won't look at a stock that is under $15.

7. Stock Market Trading Tip

Cut Your Losses.

Preservation of Capital. "How much can I loose on this trade?" is what the pros ask themselves before they enter every single trade. Preservation of capital is the single most important aspect.

Hope is not a strategy. Not cutting losses is the reason people go broke trading. Use stop-losses. The worst and most common mistake a trader/investor makes is hoping for a stock to recover. Don't to hold onto falling stocks. This comes from not wanting to loose money or arrogance.

Preservation of capital is the single most important aspect to success in the market. Sell if your stock is down more than 7% from your purchase price. Don't hope it will go back up. It may drop 40%. The Nasdaq is down over 63% from its 2000 high. That's ten years later.. Sell if the stock is not going up but the rest of the market is. Sell if earnings start to slow down. Sell if there is a lawsuit. Sell if earnings slowdown.

8. Stock Market Trading Tip

Buy and Hold is for Suckers.

No stock is immune to market downturns. The NASDAQ has lost 63% of its value and has not recovered in TEN years. Buy and Hold is for suckers. Some of the so-called best high flier stocks of the late 90's are now either penny stocks or have totally folded and no longer exist. What used to be considered long term was ten years. Now long term is more like ten months. Few companies continue to go up for long periods of time. Even google went from $800 to $300 in less than a year.

9. Stock Market Trading Tip

Never short a dull market.

A dull market is considered a market where prices are going sideways- meaning they are not really advancing or declining.. Often referred to as a trend less market. It is usually a sign the big money, institutions are on the sidelines waiting for the right moment to start buying again. The slightest good news can cause a powerful rally to take place. If you are short a stock and it rises rapidly you will be caught in a vicious short squeeze which could result in a margin call and probably a loss.

10. Stock Market Trading Tip

If a stock if $50 and drops to $45 -DON'T buy more shares. Average Up! Averaging down lowers the average cost per share of the stock . This will only lead to two outcomes. One the stock turns around and goes back up above both of your buy points and you have a nice profit or two you just own more share of a losing stock. When a stock drops in price supply outweighs demand - translation less people want the stock. Why risk buying what others no longer want in the hopes that they change their mind and want it back again?

11. Stock Market Trading Tip

"You can never go broke taking a profit' WRONG!!!

If you are wrong on half of your trades( which is the average of some of the most successful traders) then you must make more than you loose. Traders usually hope, pray and let their loosing trades go on until it devastates their portfolio. You let your winners run and cut your losses immediately. Most traders do the opposite. Traders get so excited about a profit they immediately sell their winning stocks for 10-20% profit and keep their losing stocks. This is simply fear and greed. Successful traders aim to make at least double on their winners of what they loose on the failed trades. If you take your profit too soon you will never succeed.

12. Stock Market Trading Tip

Take a "Feel Good Profit".

Feel Good Profit -sell half of your position as a part of your investment strategy.

selling half to take profits off the table- that way if it reverses you still made money- you minimize risk while taking locking in your profits
selling half to minimize downside risk (losing unrealized gains) if it reverses now you will only have half of your investment loose value
selling half to take profits off the table, then re-buying the shares with that half if it pulls back to its support or breaks threw a resistance level.

Minimize Risk - Selling half of your position is a very simple and effective way to lower risk

Minimize Risk + Take Profits- if a trader is holding a stock that has a big unrealized because it rocketed up 25% in one day, the pro trader will sell half the position, bank some profits and in doing so minimize risk.

13. Stock Market Trading Tip

Learn and Practice Position Sizing.

Determining how much of a stock to buy in a trade is one of the most important and overlooked aspect of successful trading. Traders usually take a random position size; they may put 1/4, 1/2 or even all of their account into a single trade. Often this is based on how optimistic they feel about a trade. This is an insane way to determine position size. A trader should have no more than 5% of their money at risk on any one trade. That does not mean putting all your money into one trade and putting a 5% stop loss. A trader should not have a set position size for all trades either. This will lead to under-performance.

14. Stock Market Trading Tip

You are your biggest enemy. Control your emotions.

"When emotion and logic conflict, emotion will win:" - Jesse Livermore

Excitement- (and fear of missing an opportunity) often persuade us to enter the market before it is safe to do so. Fight the "Get rich quick" attitude. Control your emotions.
Patience- Be emotionally detached from the market. Treat it as if the money is not real. Wait for the right market conditions. Concentrate on the technical aspects of your trading plan not on the money. Don't trade too often. Be patient and success will follow.
Only trade with money you can afford to loose. If you are trading your rent money - kiss it goodbye. Trading with money you need or money you borrowed will affect your ability to think clearly and you undoubtedly lose all of it.

15. Stock Market Trading Tip

Go With Where the Elephants Go.

The multi-billion dollar funds move stocks and cause them to double or triple. What do these groups need to have a trade/investment qualify to be a stock market pick? They look for Earnings Surprises - Analysts Raising Estimates - Accelerating Earnings Growth-Price-to-cash-flow ratio under 35. Price-to-earnings-growth ratio below one signal undervalued stocks and those with PEGs above 2 are overvalued. Big funds only buy a stock with return on equity above 15%.

16. Stock Market Trading Tip

Have a detailed Exit Strategy.

What price -initial stop loss- will you sell at if stock starts going down (how much or what percentage of your investment are you willing to loose?How will you take your profits? What price will you sell if it goes up? Will you sell half at one price and then the rest at a higher price? By how much will you trail your stop? Meaning if it goes from $50 to $60 and turns around- will you sell once it gives back 2%, 4%, 5% etc... when will you sell to lock in your profits?Will you add to your position if it goes up? If so at what price? Remember you can't control prices - only your reaction to those prices.

17. Stock Market Trading Tip

Master Technical Analysis

Price Trends- Up Trend, Down Trend
Support and Resistance Areas
Strength and Maturity of Trend
Entry Pointss for trades and investments
Trading Ranges
Chart Patterns

Most Valuable Technical Analysis Chart Patterns

Head-and-Shoulders Patterns: The head and shoulders is considered one of the most reliable patterns. This is considered to be a reversal pattern when a stock is topping out.
Triangles: A triangle is when the range between the highs and lows narrows. These occur when prices are bottoming or topping out. As the prices narrow, this will signify that the stock could break out to the up- or downside in a violent fashion.
Double Tops: A double top occurs when prices rise to a certain point on heavy volume and then retreat. You will then see a retest of that point on decreased volume. At this point, a decline will take place and the stock will head lower.
Double Bottoms: A double bottom is when prices will fall to a certain point on heavy volume. It will then rise and fall back to the original level on lower volume. Unable to break the low point, prices will then start to rise.
Cup and handle: is a bullish chart pattern that is defined by a chart where a stock drops in value, then rises back up to the original value, then drops a small amount in value, and then rises a small amount in value.

By learning how to read a technical analysis chart a trader can analyze- What is the price? Where has it been? Where is it going?

16. Stock Market Trading Tip

Volume- second only to Price.

Price is definitely more important than volume but volume confirms the price action and often gives advance warning of an impending shift in trend. Volume measures the momentum behind a given price move.

17. Stock Market Trading Tip

Don't diversify.

Diversifying is one of the most common mistakes that investors and traders do. Your winners will be diluted by your loosers. Have different trades in your portfolio with different risk levels but don't be everywhere buying utility stocks, high tech, emerging markets etc? Find a few select trades that fit you plan and go in hard. Stocks tend to move in cycles. One sector will be hot for a while and then cold. If you buy bank stocks, utilities and tech stocks all at once you undoubtedly will wind up flat as they will all not be increasing at the same time. If you buy a few different companies all in the same sector that is fine. It is a hot sector and a majority of them will most likely increase with the group. Everyone says diversify buy all you do is offset your winners with losers.

18. Stock Market Trading Tip

Don't buy a low priced stock just for its dividend.

A low priced stock makes the dividend percent higher. Sometimes the dividend yield is 10, 15, even 20 percent. What happens is that the company that own the stocks suddenly eliminate or severely reduce the dividend causing the stock price to crash. Now you have a low priced stock that crashed even further and no dividend.

19. Stock Market Trading Tip

Ignore Market Gurus, talking heads on TV, and any other so called "experts".

Simply create your trading plan, look for high probability trades and follow the rules and you will have the edge. Don't follow the rules and be eaten alive by the pros who live by these rules.

20. Stock Market Trading Tip

"Short the Turn Not the Trend".

Shorting the trend refers to trying to predict when a stock or the market has finished its upward climb. It means actually shorting the market or stock when it reaches a new high. The trader is making a huge gamble that the market will turn and sell off.

Let the stock or the market peak and begin its turn downward. Yes, you may miss 10% of the move but you probably eliminated 90% of unnecessary risk. Always shoot for the middle 80%. Think of a stock's rise like a roller coaster. Buy after it begins its ascent and sell after it begins its descent. Short the turn.

21. Stock Market Trading Tip

Ignore fundamentals when trading

Stocks do not follow fundamentals. It's all about "perceptions." Fundamental analysis states that a stock has an intrinsic value, a value of what it is really worth based upon revenues, expenses, assets, liabilities, health of the sector the company is in, the economy in general etc... the truth is a stock is only worth what someone is willing to pay for it right now.

22. Stock Market Trading Tip

Don't Ever "Chase a Stock".

"Chasing a stock" is when you target a stock you believe will go up but you miss your buy point at $50. It is rising rapidly and you keep trying to get your order filled. It is now $51 then $52 and you trying to buy it. Let it go, chasing means you are going to buy at a price higher then where you wanted (possibly at the peak) which often leads to buying right before it comes back down. You miss your buy point so you keep trying to get your order filled as the price increases.

<23. Stock Market Trading Tip

"Don't Always Be In The Market"

There are times when it is best to stay out of the market and watch from the sidelines. There are not always great trades waiting for us. Many traders say they make most of their money (homeruns and grand slams) a handful of days out of the year and make little singles here and there the rest of the time. If your trading plan doesn't come up with high reward opportunities turn off the computer and take a day off. Don't try to force the market. You will undoubtedly loose.

24. Stock Market Trading Tip

Don't Overtrade.

Overtrading is an addiction to placing trades. You actually trade/invest too often. You want to trade all the time. You want action. You are not patient waiting for those ALMOST certain trading/investing opportunities where big profits will be GIVEN to you. You are drawn into short-term gambling methods or even highly stressful day trading techniques. Not realizing the big money is in the big moves. Be patient and the money flows in.

25. Stock Market Trading Tip

Master and Incorporate Short Selling.

Once a stock tops and starts to consolidate, you want it to slice through the 50-d moving average and then the 200-d moving average.
A crossover between the 50-d m.a. and the 200-d m.a. is ideal and is graphically presented on the chart
The odds of success increase with each failed attempt for the stock price to recover these major long term moving averages.
Head and shoulder tops can also serve as ideal setups for potential shorts if they take at least five months to develop.
A decreasing relative strength line and a negative pattern on the point and figure chart can also confirm that the stock is rolling over and setting up an ideal short.
Finally, volume should be increasing and the stock should be under distribution as it violates the major moving averages and starts to break former support levels.
Additional criteria for shorting candidates can be decelerating earnings and sales and a relative strength line heading down.
Industry groups that are becoming weak or are showing multiple stocks falling and breaking through key trend lines should be noted on a watch list.

26. Stock Market Trading Tip

Buy on the Dips.

I have never been a fan of buying on weakness and selling on strength. If a stock is strongly trending upward I will buy on the dips, which is when short-term investors take profits and the stock retreats from 2% to 6%. That is usually not weakness, that is simply profit-taking. If a stock has been on a long run upward in price, eventually, the trend will have a moderate to significant pullback.

If the stock makes a very drastic increase in price in a short period of time, then selling into strength makes sense. There is an expression called "going parabolic", which means a stock for example goes from $40 to $140 in two months, which is usually unsustainable and the stock will suffer a large correction. Selling portions of your holdings in that stock as it dramatically ascends to preserve your profit is wise. It is better to sell too soon than sell too late.

More Stock Trading Tips here here

Remember "the market can stay irrational longer than you can stay solvent" ! So follow these tips. Hope this information helps you create great wealth and financial peace of mind.