Success Trading Group Secrets of Successful Trading 365 Days Without Recording A Loss We are often asked how in the world did your Success Trading Group record 52 closed winning trades on its Main Trade Table in 52 weeks with no losing trades? Well, let me first state that it is true. The Success Trading Main Table is posted in the member’s section and records every trade we have made over the last several years. In fact, in a recent 5 year period we closed nearly 200 trades with a 96% winning track record on our Main Trade Table. While we obviously can’t tell you our exact “system” we use to pick trades; we can provide you with an outline of exactly how we go after our stock picking ideas. SYSTEM OVERVIEW Here is a brief overview of the main points behind our success. • Research for safer quality stocks • Study trading ranges • Buy on dips and sell on peaks • Implement money management techniques • Don’t be greedy • Short-term plays TRADE ONLY QUALITY STOCKS We believe that trading success fundamentally depends on your stock picking abilities, the quality and characteristics of the stocks you trade, and how well they match your trading strategy. Few Stocks We prefer quality over quantity. We focus on just a few stocks, analyze them in detail, follow them daily, and carefully monitor all events that impact each of our stocks. Strongest Companies in Each Sector We achieve diversification through sector allocation because sectors can be cyclical in performance. To reduce risk, we only invest in the best companies in each sector and build a well diversified portfolio with only top-notch stocks. Solid Industries Of the hundreds of different sectors and industries to invest in, we focus on only a select few. We carefully evaluate historical sector performance over long periods of time, and particularly through financial downturns and upturns to gauge how each sector handled volatility and external influences. After our exhaustive analysis, we pick a few good sectors to focus our efforts on. Strong Fundamentals When short-listing stocks, we look for “good numbers” – stocks that have consistently strong revenue growth relative to their peers, low operating costs, a consistent increase in profit margins, low debt, good cash flow, and a continuous build-up of cash quarter after quarter. Strong Management and Public Image In addition, we look for stocks with excellent (we call it “great”) management and a solid track record of delivering exceptional value. We look at details such as executive incentives to see how well they align with enhancing shareholder value, executive reputation and performance in prior positions, their focus on quality, innovation, competitive positioning, on customer, employee, partner and supplier relationships, and more. BUYING ON DOWNSWINGS; SELLING ON UPSWINGS While this sounds simple, it is far easier said than done. Our research approach and trading methodology identifies ideal entry and exit points for winning trades. Historical Trading Range We carefully look at the price history of each stock before we make the trade. We study trading ranges, use proprietary algorithms to determine peaks and valleys (ceilings and floors, if you will) under various situations, and extrapolate past performance to current fundamentals and recent 60-day price history to determine trade entry and exit points. PROTECT YOUR MONEY WITH MANAGEMENT TECHNIQUES It is very important that you trade with money that you can afford to lose, and will not need for at least five or more years, as a rule of thumb. Trade With Money You Can Afford To Lose When you start investing, you’re apt to make the most mistakes. Therefore, it is imperative that you only invest money you can afford to lose. Do not risk money that you’ll need for a mortgage or car payment, because once you put money into the market, you cannot count on withdrawing it in a week, a month, or even a year. So discipline yourself on budgeting, and only invest money you need not touch for the next 5 years or more. Opening Trade When we have done our research and are ready to buy a certain stock, we allocate a certain amount of capital to it. We then open our position in that stock with only 50 percent of our allocated capital. This is because we know stock prices constantly fluctuate based on broad market sentiment. While we may miss out on a few up-market moves, we inevitably find additional opportunities to plow in the remaining 50 percent of our capital at a lower cost. We only allocate small amounts to each stock. If you put too much into one position and that stock tanks, you can sizably dent your trading capital. So always follow one simple rule - do nothing that has the potential to wipe out your trading capital if the trade goes south. Be able to stay in the game is critical in the long-run. Cost Averaging At Bottoms With our approach of picking only a few stocks, we know the intrinsic value of each of our positions and can quickly assess when a market or company-specific event artificially punishes our holdings. We view such market drops as excellent opportunities to buy more. That said, we do not jump at the first buying opportunity on a dip but analyze each dip against historical prices, and wait till our model tells us that a floor has been reached, and only cost average, if at all, when the stock bottoms and settles at a new low. PLAN EXIT POSITION BEFORE YOU ENTER Our focus is not on holding stocks for the long run but on entering and exiting our positions rather frequently. Our trading strategy also focuses on not getting overly greedy. We do not set percentage targets and wait. Instead, we are happy to make 50 cents to a dollar per share on each of our trades. Our strategy focuses on keeping our money in circulation and incrementally our capital base with each trade. We watch our shares like a hawk looking for the kill. But sometimes, when we have other commitments, we place limit sell orders good for the day. It’s not ideal but still works, and let’s us live a little outside the trading room. REDUCE RISK Avoid Events We do not trade on inside information. So while our financial model predicts each stock’s anticipated revenue and earnings quarter by quarter, we also know that companies often surprise even their most ardent followers, on the upside sometimes but more often on the down side. Therefore, we tend to stay away from “event driven” investments such as trades in anticipation of earnings, merger and acquisition announcements, etc. Avoid Out-of-Favor Sectors With our focus on keeping money in circulation, we stay away from out-of-favor industries and sectors because such investments tie up capital, decrease liquidity, increase bid-ask spreads, and provide no foresight on when things might pick up. Instead, we prefer to trade high liquidity, well followed sectors. GET OUT OF THE “INVESTING” MENTALITY AND GET INTO “MAKE A PROFIT TODAY” MENTALITY We are here to trade and make profits every day on up and down moves. Market volatility is our friend. We are not in this to wait months and years for our investment thesis to play out. To profit from our strategy, you must get out of the “investor” and “stocks for the long run” mentality, and get into the “trader”, “make a profit today” mindset. Our approach is definitely “profits today”. MUST USE DEEP DISCOUNT BROKERS Trading commissions and fees can quickly add-up for frequent traders. So pick an online brokerage that charges low trading commissions and has a feature-rich trading platform. Pick a broker whose website is intuitive, packed with features at no additional cost, and easy to navigate. For emergencies, it’s also nice to have a broker that responds to calls quickly. With the proliferation of smart phones and 4G mobile data networks, many brokers have mobile applications that let you trade on-the-go – with streaming real-time quotes, trading tools, graphs and charts, and the ability to make complex trades enabled by large mobile phone screens. For frequent traders, Barron’s recommends TradeStation, MB Trading, Interactive Brokers, Lightspeed Trading and TD Ameritrade (thinkorswim). Etrade, TradeKing, OptionsHouse and Scottrade also receive high marks. STAY ON TOP OF YOUR STOCK LIST Legions of traders have lost money simply because they took their eyes off the ball. Keep abreast of all news on your stocks, and bad news in particular. If your stock fundamentally deteriorates in quality, delete it from your list immediately. And continuously look for new stocks to replace those you strike out. Get Our Trading Reports Free for 30 days! We call our Trading Report Service “The Success Trading Group” and through this special offer, you can receive a 30-day free trial to the Success Trading Group service AND save $50 per month (after your free 30-day trial). Simply follow this link: http://www.marketfn.com/a/success147.htm Don’t miss out on this Special Invitation to receive our Trading Reports for free!
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