c15 JWBT016-Busby October 9, 2008 9:21 Printer: TBD
148 STRATEGIES TO WIN
After locating a list of stocks with adequate volume and volatility, I
consider the overall market. Is the market bullish or bearish? Then I con-
sider the various sectors. What sectors are moving up? If I go long, I want
the overall market to be going my way, and I also want the sector in which
the stock is included to also be moving up. The same is true for a short
position. I want to move with the current and not fight it.PEARL 19When overall market prices have risen 2.5 percent during any session, do not
go short.Finally, I look at the equity indexes. I locate a stock that tends to move
in parallel motion with the S&P 500 futures or one of the other indexes,
such as the Nasdaq futures. Because I monitor the futures indexes, adding
stock trading to my list of strategies is just another way to maximize my
use of time and get the most payback for my market knowledge.
As with all trading, I analyze the market and know key numbers before
I click the mouse. I never take on a position unless I know not only my
entry price but also my profit targets and my stop/loss placement. As with
futures contracts, when I get into the market, I simultaneously place orders
for profits and stop/loss. Remember to set reasonable profit goals. Rome
was not built in a day, and your trading fortune will not be, either.
In addition to intraday stock plays, I also hold some positions for a
longer term. Generally, when I hold onto equities, I have some distinct rea-
son for doing so. For example, one stock that I held quite some time was
CBOT. The exchanges in general are undergoing a great deal of consoli-
dation and restructuring. Through information in the media, I knew I was
holding a product that was escalating in value and would likely continue to
do so. Therefore, I let the product and the market tell me when to buy and
when to sell. That is the way to make money.
Geof Smith, my friend and coworker, enjoys holding some equities
for years. Geof selects his stocks on the basis of his personal knowledge
with their products. A few years ago Geof noticed that his wife was writ-
ing a lot of checks to Bed Bath & Beyond. Geof researched the company
and its product line. He looked at its trading history and liked what he
learned. Then he invested in this company. Geof made some money with
that particular play and was pleased with his investment. Geof has repeated
this process many times over the years. That is, he finds a product he
likes. He thinks about the potential for growth for the particular product.
Then he investigates the company. Do the numbers look good? If so, he
dives in.