The Bull Hunters Guide

I have spoken about many stock market strategies, touching on the DJIA or Dow Jones. We have been over the US stock market and ways to understand how to make money with the correct share strategies. Today I want to talk about one of the outcomes of a successful trade; The Profit and the underlying benefits. In other words: when do you take a profit and where do you put the profits?

Taking Profits When Trading

I haven’t got a more straight answer than this. Decide before you place the trade. How much profit would you be happy to take or make? 20%, 50%, 100%? Then if you reach the target, take it. Cash it in there and then. Don’t hesitate! I will give you a great example of a trade that I didn’t set a profit target on. I bought 90000 options on a stock for 3cents each. That cost me around $2,700. I was happy to take the risk and lose the lot. Yes, hardly a great strategy but the gambler does come out if you don’t plan your trades.

Beware the Gambler

Here’s the strategy I call “The Zero Strategy“. $2,700 of 3 cent shares. The stock went up to over $1.00 and the options became worth around 80cents each. Not bad in 15-16 months. My $2,700 was now $72,000! That’s around 2600% Return On Investment. I didn’t take it though. Why? Well, there were a few reasons. One was that I KNEW the stock would keep going up. And it did. Another 10cents or so.

Down Goes The Stock Market

Then it came down. I’ve still got the stock and it’s worth about $17,000 and still in a pretty good margin. When will I sell it? Probably never! It’s too good a story to tell. It’s priceless! So now, what on earth has this got to do with The Gamblers $18,000 Piano? I only put that in the headline so you’d read this… Just Kidding! I bought some other shares around the same time and here comes the Grand Piano…

The Stock Markets Grand Piano

I bought 2000 shares for $1.59 each. This time there was a plan in place. An ambitious one, but realistic however. A uranium explorer. My friend had 3 Million of these shares and bought them for less than 3 cents. He sold them around 45-50 cents. Work out the profit on that! Absolutely Massive! My plan was to sell these shares at $9.00. They got to $9.06 and I sold them, turning $3,180 into $18,120. Then I proceeded to chip in a bit and buy a Grand Piano for my son who now has won a few competitions and wants to become a Concert Pianist when he grows up.

Where is the price on those shares now? Who cares! The stock market sponsored my Kid and gave me memories to enjoy for years to come. (The shares went on to over $11.00 then dropped very fast to $6.00)

So when do you take your profits? When you have something fun to spend the money with. There are always profits to be made. Just know when to take them home with you.

Sometimes the Bullhunter has to be Bearish.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2007

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Moving along to the next excerpt of The Bullhunters Guide to the US Stock Market we will be tackling the old Fundamental vs Technical analysis which is always rather interesting.  I have met and been in contact with many graduates of the Jamie McIntyre homestudy who are all right about there trading strategies as some only take on the Fundamental analysis and others take on the Technical analysis, and then some use a bit of both.  If it suits your trading system then that’s great.  Whatever works for you is the right thing to do.  Let’s see what Sean has to say in his eBook.

Value investors most commonly prefer fundamental analysis.  This is the rigorous approach of determining the value of a stock and whether or not it is under or overvalued.  Technical Analysis by contrast, examines the price history and the chart patterns of a stock.  Aggressive growth investors are more concerned with the technical analysis and will never buy a stock without first consulting a chart.

Support and resistance constitute the basics of technical analysis.   As a stock’s price fluctuates over time, it might routinely go down to one price (but no lower) and then rise to another price (but no higher).  This low price is considered its support and the high price is its resistance.

For example, if a stock traded in a range of $25 and $35 over the course of six months, $25 would be thought of as its support and $35 would be considered its resistance.  Support can be thought of as a price floor - the stock isn’t likely to fall through that floor.  Resistance is like a price ceiling.

If a stock does fall through its support (floor), this is a very bearish sign.  Who knows how far it will fall.  Technical investors think it will keep going down until it hits an earlier support level.  By the same token, if a stock breaks through its resistance (ceiling), growth investors think the sky is the limit.

At first glance technical analysis may seem a bit silly but there are several reasons to take it seriously.  For one, if several other investors believe in it (which they do) then their actions will create a self-fulfilling prophecy.  Secondly, support and resistance often represent psychological barriers.  Perhaps a lot of buy and holders keep adding to their position each time the stock hits $25.  But if it ever fell much lower, they all might bail causing the stock to plummet in value.

For these and other reasons it is a good idea for even the most fundamentally focused of value investors to consult a chart before buying a stock.  Luckily, several sources on the internet provide charts free of charge.

To have access to these websites and their free charts please download the eBook now if you haven’t already done so.  This also means that you will have all the information at hand when you need to refer to it.  You will find the links on page 27.

I would like to thank all our readers for the votes you have been giving this blog as it spreads the message that can help many stock market traders out there.  Keep it up and it will send us to the top of the charts.  If you haven’t voted, the icons can be found in the right hand column.  Thanks for your continued support.

To Your Success

Angela Recchia
Graduate Support
Universal Wealth Creation © 2004 - 2007

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Your biggest enemy, when trading, is within yourself. Success will only come when you learn to control your emotions.
Edwin Lefevre’s Reminiscences of a stock operative (1923) offers advice that still applies today.

Hello Fellow Bullhunters

A little about the psychology of trading is our topic for today. What happens when you begin to trade is that it becomes an expression of your own personality. You take it on originally thinking it is all black and white when instead, as you become more involved with the process, you start to form a kind of love affair with the market and find your favorite stocks and treat them as your very own. STOP RIGHT THERE…

In fact, when this happens, your emotions start to come out and rule how you trade. Becoming emotionally intelligent is a very important step to take at the very beginning. You see, good trading is not a question of doing, rather, it is a way of being. To learn more about Emotional Intelligence, go here to explore Jamie McIntyres ebook: What I Didn’t Learn At School But Wish I Had.

When you trade with your emotions you enter into a downward spiral so do not put yourself under too much pressure because you will fail. It’s important to learn to risk because without risk there is no reward. The minute you become risk orientated you are in the right frame of mind for trading the market.

Develop your own style of trading in a way that you stay detached from it. It is a good idea to start with small trades i.e. one contract at a time. See where this takes you and always, always record every step of what you are doing. This will tell the story of your trading personality.

A trading register will have your buy and sell price, the date you entered and exited. Also write down if the dog next door was barking at the time you chose to do that trade. Why you decided to take the trade. The profit/loss you made. Where you set your stop loss at. All these things and more will reveal your trading personality once again so review your register at any time and you will know straight away whether or not you are an emotional trader.

Wait for the right market conditions before trading. There are times when it is wise to stay out of the market and observe from the sidelines. Do not enter every single trade you see. Do not become a screen watcher and get up to the minute prices of your stock. Set yourself up so that there will be no need for this. You have a life to live… don’t you?

Have the courage of your convictions: Take steps to protect your profits when you see that a trend is weakening, but sit tight and don’t let fear of losing part of your profit cloud your judgment. There is a good chance that the trend will resume its upward climb if you are bullish in a trade, or downward spiral if you are bearish in a trade.

I would like to acknowledge Hans Kujat, a fellow 21st Century Academy Graduate who made the suggestion for this weeks topic.

There is plenty to learn about trading and I am here to help you on that journey. For those of you who wanted to leave me a comment last week and couldn”t because of the challenge of a technical hitch with the software, I invite you back now and look forward to hearing from you.

Angela Recchia
Graduate Support
Universal Wealth Creation © 2004 - 2007

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