nader's thinkery

Trading Knowledge

Trading Knowledge

trading Mar 5, 2014

Accumulated knowledge from blogs, people, magazines, etc. over the last year.

Most importantly

  • Volume is the cause for price
  • Breakouts have a bigger volume and need confirmation on the second day with more than average volume afterwards
  • Volume and overlayed MA20 (because there are 20 trading days / month)
  • keep it simple with charts: price and volume are the most important
  • concentrate on current investments, not past or future ones
  • only look at the daily chart, not 30 mins, 5 mins or anything. it makes you crazy
  • breaking resistance needs a follow through day, i.e. another day up
  • in a bull market a normal pullback from the highs is a 50% retracement
  • always look at daily, weekly, monthly to spot resistance / support points
  • Watch Volume on the daily chart to compare it better with other volumes on other days
  • Read news and find trading ideas 6:00 - 7:30am (Europe), for sure before the trading day starts
  • Always keep some cash for short term opportunities
  • You don’t need to trade every day! You don’t need to trade every day!
  • If a company publishes earnings and the stock doesn’t move much it might be that most people already own the stock. It could go down.
  • Make sure you know who publishes the information, who’s behind the news
  • Stay away from penny stocks
  • Use a stock scanner the day before trading to find potential candidates for trading

Key economic indicators

(always check for the general market direction)

  • Interest rate (price of money): if interest rates are low it’s good for the stock market
  • Inflation: High inflation is bad for the economy. Deflation is bad as well. Most sectors will do badly
  • GDP: steadily rising gdp is good for corporate earnings. 2 consecutive periods of falling gdp is called a recession
  • unemployment rate
  • consumer confidence (the less consumer confidence the less spending happens)
  • us house prices
  • Most important indicator: ISM Index (very good predictor of how the economy will be in 3 - 6 months): above 50 it is expanding, below 50 it is contracting)