The Intelligent Trader: Proven Techniques For Winning In The Stock Market
by Oleg A. Pozhidaev.
This must read book is the perfect starting point for aspiring new traders who are ready to take their skills to up to the professional level. It takes traders through a journey where we learn the basics first such as how to read price charts or common candlestick patterns. That information is then used as building blocks in order to serve as a foundation of knowledge for much more effective and complex trade setups. Readers will learn specific trade setups (including suggested stop losses and price targets), how those setups work, how to look for them quickly, and how to use them effectively. The trade setups provided in this book have been proven time and time again to produce reliable and consistent profits from the stock market.
Topics Covered: The 6 step process to mastering trading – How to read candlestick charts – Bid/Ask spread and order types (including OCO and OTO orders) – Support and resistance – trend lines – Common price chart patterns – Gaps – Trading effectively with RSI – The MACD Indicator – Bollinger Bands – The TICK trade – The Darvas Box – Pivot Points – Squeeze trades – Elliott Wave – Fibonacci Theory – Advanced squeeze trade techniques – Options contracts – Steps to take when you start trading – The 7 piece formula to success – Dividend investing – Why the news is wrong – And much much more!
Stock Trading Tip #1: Be the Casino
I want you to think about a Casino. There’s a saying that “if you play long enough, the house always wins.” This has a lot to do with probability. A casino won’t win every single time, every now and then they will have to give away money to a customer who won a jackpot, had a lucky slot play, or put down some well-played cards in poker. But a casino is an extremely profitable business, so where’s the money come from? Well it comes from probability. A casino doesn’t need to win every time to make money, it just needs to win most of the time – say 55-60% of the time. This means that across a large enough sample size, across all the jackpots, black jack 21’s, and royal flushes, a casino will still come out on top, because their edge in probability allows them to keep more profits than they lose.
Your trading should be meticulous and consistent much like a casino. You chose an edge (whether it’s a squeeze trade, a pivot fade, a TICK fade, etc) that you know gives you a high probability of winning, and you take that edge, with the same exact position size and entry method every single time. If you are disciplined enough to do this, and if your trade setup is truly an edge in probability, then you will see a slowly increasing equity curve. You will lose some trades, but across a large enough sample size, doing the exact same trade with the exact same position over and over will result in consistent and reliable profitability from the stock market. Market Prowler Members receive a weekly newsletter featuring squeeze trade and pivot fade setups, both of which have proven themselves as extremely effective edges when it comes to the stock market. With the setups found in the Market Prowler Newsletter, members can make consistent and extremely profitable trades.
Take on the right position size. Aim small, miss small.
One of the biggest mistakes new traders make is taking on position sizes too large for their account. Think about it, would you rather trade 10 $500 Option contracts in a $5,000 account or in a $100,000 account? Trading 10 contracts in the $5,000 account leaves no room for error. It’s all or nothing. Every tick that goes against you will cause an emotional response that can cause you to abandon your plan and bail out of a good trade early. Meanwhile, trading them in the $100,000 account is stress free because your position size is small compared to your total account size, and if the trade is a losing one you are not affected as severely by the loss. Remember to choose your position size appropriately so that as discussed above, your edge in probability has enough time to work itself out over a large sample size. The last thing we want is a single trade to wipe out your entire trading capital. Recommended position sizes differ with every person, I have seen people trade with extremely conservative numbers such as 0.5% of total account capital per trade, all the way up to the bigger risk takers staking 10% or 15% on a single trade. Do the math and figure out what position size works best for your situation.
Always set a stop loss. Use trailing stops if you swing trade.
Stop losses will automatically close out your position if the price falls to a pre-determined level. Not only should you set a stop loss, but never remove your stop loss for any reason whatsoever. It’s annoying when you get stopped out of a trade and the price instantly bounces back up, but remember, re-entry is only a commission away. More often than not, a properly set stop loss will result in taking you out of a trade early-on in a trend change, saving you hundreds or even thousands of dollars. If you read ‘About The Owner’ in the Market Prowler About page, you’ll know by now that a long time ago when I first started off trading I didn’t use stop losses nor did I even know what they were. I had to lose $2,000 of my own money, or as I like to call it “pay for a stock market lesson”, to learn the value of a well-placed stop loss. After taking a hit like that do you think I ever traded without a stop loss again? Hell no.
A good stop loss is large enough to filter out random market noise, but tight enough that if the trend changes it will get you out of a bad trade. One way to estimate a proper stop is to take the Average True Range (ATR) or whatever stock you are trading, double it, and use that as your stop. Similarly, trailing stops are a good option as well. Trailing stops will trail a stock’s upward price action and get you out if the upward trend changes. Years ago when I was trying to keep trading while serving in the Marine Corps, because of the nature of the service I would go days or sometimes weeks without internet access. I had to rely heavily on swing trades with trailing stops in order to keep making profitable trades while I was away. Even today when I go on vacation I’ll put on a swing trade with a trailing stop, and fly off to a tropical destination worry free, feeling absolutely no need to be constantly checking the markets. I know that my stop loss will serve as a shield and lock in profits should a trend change occur. This lets me enjoy my vacations stress and worry free. Market Prowler Members receive a weekly newsletter with powerful stock setups as well as suggested stop losses for those stocks based off a 2 ATR calculation.
Always have a plan.
Before you even think about hitting that ‘buy’ button, you should already know 1. Why you are entering this trade? 2. Is this a rational reason to enter a trade and does it yield a high probability of success? 3. What is my entry strategy, am I scaling in with multiple trades or buying all at once? 4. What will be my stop loss? 5. What will be my profit taking strategy, and how much do I expect to make off this trade? Will I sell my shares all at once, will I scale out? At what price point will I begin to scale out?
Trading without a plan can have devastating effects and introduces human emotion and impulse into the equation. When it comes to the stock market human emotion and impulse are two extremely detrimental things. If we trade with a pre-determined plan we limit our chances to self-sabotage a trade based off emotional reaction to price action.
If you have a small account size, use options as leverage.
I define small account as anything under $75,000, and that’s being generous. If you are trading with 1% capital that $75,000 leaves you with $750 to allocate per trade. With such tiny amounts of capital your best bet to leverage your money and get the best return for your investment is to use options. With options you can earn much bigger returns than you can trading straight stock. I’ve seen new traders successfully take accounts of $1,000-$4,000 and multiply them to amounts that were 3 or 4 times the original size within months using options as leverage for their tiny accounts. All of the setups provided in the Market Prowler newsletter focus on giving you high-probability trade setups that can be exploited using both conventional methods (buying stock) as well as using options. I will typically use options for day trades and swing trades that I expect to last 3-10 days. I will purchase stock for trades that I expect to last weeks or months at a time. To learn more about options trading visit our resources page.
Don’t over trade.
Trading too much can hurt you more than you know. As traders it’s crazy to think that realistically, 70% of our day is spent waiting for a setup to unfold, and 30% is spent actually initiating a trade, managing a trade, or exiting a trade. Some days we don’t take any trades because we don’t see any setups occurring. Your best chance for success is to pick 2 or 3 trade setups (Market Prowler primarily uses the squeeze and pivot fade) and wait patiently for them to show themselves in a stock’s price chart. If you don’t see a setup you don’t take the trade, simple as that. And when a trade setup does occur, you should already have a plan for how you’ll be going about the trade. As John Carter put it “Trading should be boring like factory work. If you want entertainment or thrills, go to Disneyland.”
And finally, a quote about risk management.
Your job as a trader should be first and foremost to protect your capital from possible risk and loss, only once you have done that can you begin to think about making any money in the stock market. If you end up remembering just one thing after reading all the information that I provide on my website, please remember this quote: “Amateurs focus of making profits. Professionals focus on taking small losses.”
Tired Of Losing Trades?
Do you make a few good trades but then lost it all in one or two bad trades? We’ve been there. In fact, that’s a completely normal step in learning. If you’ve ever wondered how professional traders can do so well in the markets, it’s because they’ve got a trick or two up their sleeve. Consistency in trading income is just a matter of who has the best information. Certain tools can give a trader an unfair advantage over everyone else when it comes to putting in orders. Professionals know this and use these tools to take advantage of every-day traders who are trading blind. If you want to learn more about what we’re talking about, click here to check out this piece of professional grade trading software. Market Prowler is committed to bringing every-day traders the tools they need to trade like a professional.