Be sure to catch Tyler Bollhorn’s presentation at the World Outlook Conference this January 22, 23rd/2010
Do These Sound Familiar?
Stockscores.com Perspectives for the week ending January 17, 2010
Stockscores Founder Tyler Bollhorn will be a featured speaker at the 2010 World Outlook Conference in Vancouver Jan 22 and 23. This is a great conference and this year, Tyler will be demonstrating the new Money Talks/Disnat Trading Challenge game.
Those interested in attending this conference should Click Here to visit the World Outlook website for more information and to register.
As a trader, I have done a lot of stupid things to lose money. My only saving grace is that I have learned something from the mistakes and so now, when I see others doing the same things, I can say, “Hey, you are making a stupid mistake!” Here is a list of the stupid things that most of us do as we work our way through the learning process it takes to be a successful stock trader.
Fail to Limit Losses – I have not yet met someone who is always right in the stock market. That means you and I are going to be wrong some of the time. What is important is what we do when we are wrong. When the stock market shows that your analysis was incorrect, sell! Move on, get out, forget about it. Small losses won’t hurt you, using hope to justify holding a loser will.
Averaging Down – averaging down on a loser is buying more at a lower price, expecting the inevitable bounce that gets you out without a loss. This strategy will actually work a lot of the time, you just keep averaging down until the market reverses. However, when it fails to work, and you keep buying in to a stock’s bungee jump that fails to bounce, you can lose everything. Without capital preservation, you are just a spectator.
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Buying in to Emotion – it is tempting to buy more of a stock that is moving quickly higher. It is important to remember that when everyone is doing this, investors will inevitably pay too much. A simple rule is to not buy stocks that have run away from their trend line. You can buy stocks that have momentum, just wait for them to pull back to the trend line and buy them on short term weakness. Never chase.
Believing in Public Information – the stock market is efficient, it prices in all available information. That means the news release that you are reading has no value. The annual report has no value. So long as the general public has the same information as you, your decisions based on that information will provide random results.
Selling on Pull Backs – it is easy to be nervous with our winners because the feeling of having a winner turn in to a loser is not a nice one. So, we tend to sell our winners too early, getting out at the first sign of weakness to lock in the profit and give ourselves the congratulatory “you never go broke making a profit” speech. You have to maximize gains and learn to distinguish between the minor pull backs that are part of long term, money making trends and actual trend reversals. A trade is not successful until you have doubled your risk.
Taking Too Much Risk – emotion is the enemy of the trader. Cold hearted people, or at least those who do not care about the risk of the trade, are the best traders. To make sound decisions, you can not risk more on a trade than you are willing to lose. If you do, you will break your trading discipline and avoid selling losers when you are wrong or sell your winners too early.
Going Against the Mood of the Market – it is not easy to paddle a canoe up a river, against the current. It is also not easy making money on a stock when the mood of the market is against you. When considering a stock, I always first assess who is in control of the stock, buyers or sellers. To make money, you either have to trade with the group that is in control or pick the point where control changes from one group to another. Don’t go against the mood of the market.
Trade Possibility, not Probability – I remember an advertisement for a lottery, it said, “Think of the Possibilities!.” What if the lottery company suggested we think of the probabilities? We have all heard that we have a better chance of getting struck by lightening than picking the right numbers to win the lottery, but because we think of the possibilities, we continue to buy tickets. A lot of people approach the market the same way. They may look at a stock and describe all of the thing that could happen, how the company could find gold on a long shot mining exploration and how the stock could go rocketing higher. However, when you trade against probability, you are on the path to poverty.
The Canadian speculative stock markets have been the best performers in the past few months and continue to bring a lot of good trading opportunities. It is very important to not fall in love with the companies in this area because they often fizzle out quickly, but so long as you listen to the market for exit signals, you can do well trading them.
This week, I scanned the Canadian market for low priced stocks trading abnormal volume and with abnormal price action. I then inspected their charts for good pattern set ups.
V.SSE is breaking out from an ascending triangle pattern that has been building for six months and broke to the upside with very abnormal volume on Friday. There will be some selling pressure at the $0.15 price range but the volume was so abnormal on the break that I think it will have the power to move through resistance. Support at $0.065.
T.WES has been building optimism over the past few months and Friday broke through resistance. Support at $2.50.
Click HERE for the Speaker Lineup at the World Outlook Financial Conferance and click HERE if you want to learn from some of the timeless advice from some of worlds best traders including the very successful Tyler Bollhorn.
Tyler Bollhorn started trading the stock market with $3,000 in capital, some borrowed from his credit card, when he was just 19 years old. As he worked through the Business program at the University of Calgary, he constantly followed the market and traded stocks. Upon graduation, he could not shake his addiction to the market, and so he continued to trade and study the market by day, while working as a DJ at night. From his 600 square foot basement suite that he shared with his brother, Mr. Bollhorn pursued his dream of making his living buying and selling stocks.
Slowly, he began to learn how the market works, and more importantly, how to consistently make money from it. He realized that the stock market is not fair, and that a small group of people make most of the money while the general public suffers. Eventually, he found some of the key ingredients to success, and turned $30,000 in to half a million dollars in only 3 months. His career as a stock trader had finally flourished.
Much of Mr Bollhorn’s work was pioneering, so he had to create his own tools to identify opportunities. With a vision of making the research process simpler and more effective, he created the Stockscores Approach to trading, and partnered with Stockgroup in the creation of the Stockscores.com web site. He found that he enjoyed teaching others how the market works almost as much as trading it, and he has since taught hundreds of traders how to apply the Stockscores Approach to the market.
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This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don’t consider buying or selling any stock without conducting your own due diligence.