By David Grandey, All About Trends
It’s a new month and a new quarter, so time to set some new goals, right? Well, in the spirit of keeping it simple and focused, you shouldn’t. At All About Trends, our goals remain the same every month and our goals are simple and focused:
Goal #1 — Protect the value of your account
Goal #2 — How am I going to get my $500 a week. Why only $500 a week, well those modest gains will give you the following annual returns:
- 96% return on a $25,000 portfolio
- 48% return on a $50,000 portfolio
- 24% return on a $100,000 portfolio
These are the only two things that are ever on our mind — regardless of what’s going on in the markets.
One of the ways we do this is by focusing upon "What Is The Total Value Of My Account?" Bottomline, do I have more money in my account at the end of the month than I did at the beginning of the month. That’s all that really matters. We focus upon that because at the end of the month, and at the end of the year, that is how you’ll know you are successful.
What won’t be paid attention to is how many companies do I own that are "good" companies. We’ve said it before and we’ll say it again, a company is only as good as its stock. If the stock is going nowhere, what’s the sense in risking our capital? It’s all about money in motion and keeping it in a positive motion.
Sure some months will be great and some months you’ll have to work as hard as you ever have just to get the 1st down.
So, are you making money in the market? If not, what are you going to do to change that?
FOUR SIMPLE STEPS TO GENERATE CONSISTENT PROFITS IN THE STOCK MARKET
To achieve consistent gains in today’s market, you MUST have a plan and trade your plan. This means you must know what kind of an investor you are, must have a plan, must know what to look for and how to trade it and have only one goal: to raise cash in your portfolio. These are the elements that make for successful stock market investing.
The four steps below will help you do so with confidence and excitement knowing that following them will indeed help your portfolio takes off.
STEP #1: I WILL CREATE A PLAN BASED ON WHO I AM AS AN INVESTOR
Before you can create a plan, you must determine what kind of investor you are. This is an absolute must!
WHAT EXACTLY ARE YOU TRYING TO ACCOMPLISH WITH YOUR INVESTMENT DOLLARS?
Do you have a plan? What exactly is that plan? The days of "buy any stock and it will go up" are long gone and by the looks of things, they aren’t coming back anytime soon. In today’s market, you MUST have a plan. But the plan just can’t be any old plan. It must be one that is based on who you are as an investor and what you are trying to accomplish. So who are you?
Are you an investor?
Are you a trader?
Do you go long only?
Do you go short only?
Do you do a combination of long and short?
These are all questions YOU have to ask yourself. YOU have to DEFINE WHO YOU ARE before YOU can develop a plan. That said, if you’re long only, then in times of downtrends, you must be prepared to sit in cash or face some difficult times with your investments. If you’re short only, then in times of uptrends, you too will have to sit in cash or face difficulty.
Market direction shouldn’t matter. Your plan should take into account both sides of the coin. You should no longer have to ask:
Is the market going higher?
Is the market going lower?
Your answers to the above questions should be "Don’t know, don’t care, I invest in what I see, not what I think, feel or fear." But how do you get to that point?
You get there because you have a plan, are planning your investments and trading your plan. This is done according to the kind of investor YOU CHOOSE TO BE. The way you plan your investments and trade your plan defines the kind of investor you are.
STEP #2: I WILL INVEST IN WHAT I SEE, NOT WHAT I THINK, HEAR OR FEAR
To be successful in today’s market, it all comes down to understanding that you MUST "Invest in what you see, not what you think, hear or fear." This means turning off the TV and staying focused on understanding what kind of chart patterns make for successful investments and to have the confidence to pull the strings when they trigger.
For us, we look at three types of chart patterns:
Changes in trends patterns
And that’s all we look for. We don’t care what xyz analyst said about a stock, what Cramer had to say in last night’s Lightning Round or if we didn’t like the service we got at this company’s store. None of that matters. All that matters is what the chart is telling us and what we do as a result. The chart patterns that lead to significant gains are the same whether you are a trader or an investor.
STEP #3: I UNDERSTAND IT’S A MARKET OF STOCKS, NOT A STOCK MARKET
How do you make money consistently month over month regardless of market direction? How do you make money being long when the market had the kind of year it had in 2008, which featured some of the worst months the market has had since the 1930′s?
The answer is simple. It’s a market of stocks, not a stock market. Market direction shouldn’t matter.
STEP #4: BEFORE I INVEST, I KNOW MY STOP LOSS AND MY PROFIT EXIT POINT
That’s how to do it in today’s market. We don’t invest in anything without looking at the chart and determining our stop loss and the point we will exit with a profit.
For example, we have a simple rule: Buy at support and take profits at resistance. Before we make an investment, we look at the chart to ensure we are buying it at support or support is within 5-10% of our buy point. There are patterns out there everyday that allow you to get in at the lowest point possible where your downside risk is minimal.
We also look to see where the stock may encounter resistance and make sure we know what that point is and that it is far enough away from our buy point for us to reap a profit that makes the capital risk worthwhile. If the stock is in new high territory, we’ll look to take profits, or a portion of our profits somewhere between 10-15% of our buy point.
Don’t try to hit a grand slam. The key is to hit singles and then move on and hit another single. Or for football sake, get the first down, then get another first down, etc. That’s how to achieve consistent profits with little risk. And you do that by knowing up front where your exit point is.
Keeping it simple, understanding charts and using the charts to buy right and sell with a profit avoids making mistakes based on emotion, greed or misinformation.
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