| Trading Tips and Tactics of the Wall Street | | | | |
| Pros | | | | It refers to the price level at which the |
| | | | stock seems to bounce back up over time. You |
| Trading is a different game altogether than | | | | can think of support as a floor that the |
| investing. When you're investing, it is best | | | | stock hasn't seemed to crash through in a |
| to look for companies with solid business | | | | long time. |
| fundamentals, possibly near their 52-week | | | | |
| lows. | | | | Staying with the above example, "resistance" |
| | | | is like a ceiling. It's the price level at |
| Your objective is to hold the stock for a | | | | which the stock seems to bounce back down |
| minimum of one to five years, or even longer. | | | | once it's hit. |
| An undervalued stock with a price unfairly | | | | |
| beaten down is a beautiful thing to a patient | | | | The good news is that once a stock finally |
| investor. | | | | pierces through its resistance, it can go to |
| | | | the moon. Traders love a stock that breaks |
| By contrast, stocks that reach new 52-week | | | | through the ceiling because there's nothing |
| highs are more appropriate for trading. This | | | | holding it back from going higher. |
| is because traders care more about the | | | | |
| technical chart patterns of the stock than | | | | By the same token, once a stock falls through |
| its actual business. As a trading pro, you're | | | | its floor, it is likely to go down and down |
| looking to hold a stock for a maximum of a | | | | until it finds new support. This might be a |
| month or two, but more likely for days, | | | | support level at which it previously bottomed |
| hours, or even just minutes. | | | | out several times in years past. |
| | | | |
| Trading can be exciting, and it can be | | | | Stocks that face resistance or support are |
| stressful. Not everyone is cut out for | | | | unlikely to break through. Trading pros |
| trading - it takes a person with an iron gut | | | | typically like to buy stocks that are in a |
| and nerves of steel. Most of all, however, | | | | long-term uptrend and are just bouncing up |
| trading requires discipline. | | | | from support. Or, even better, they like to |
| | | | buy a stock as soon as it breaks through its |
| Is The Stock Trending Up or Down? | | | | resistance. |
| | | | |
| You might get a trading idea from a news | | | | Stick To Your Plan |
| story or even a hunch, but you should never | | | | |
| actually execute a trade without analyzing | | | | Before you buy a stock for trading purposes, |
| the stock's chart. | | | | decide at which price level you will sell it |
| | | | for a profit or loss. Trading pros typically |
| A stock that is in an overall downtrend is | | | | let winners run for 20 percent or more, but |
| rarely appropriate for trading. | | | | always cut their losses at 7 percent with no |
| | | | exceptions. |
| You can determine the stock's trend by | | | | |
| looking at its one-year chart, and connecting | | | | Remember, you bought this stock for trading |
| the spikes up over time (its peaks) and its | | | | purposes, not as an investment. If your |
| spikes down over time (its troughs). | | | | trading strategy doesn't work, don't compound |
| Generally, trading pros only risk their | | | | the problem by failing to stick to your plan. |
| capital on stocks that are trending up over | | | | |
| time. | | | | Trading takes serious discipline, and if you |
| | | | can't commit to your strategies, then you |
| Is The Stock Facing Support or Resistance? | | | | should probably stick to less volatile wealth |
| | | | building strategies. |
| "Support" and "resistance" are popular jargon | | | | |
| among Wall Street trading professionals. | | | | But if you have the necessary discipline, and |
| | | | the thought of your net worth going on a |
| "Support" generally applies to a stock that | | | | rollercoaster of ups and downs doesn't make |
| is headed down over the short-term, but may | | | | you nauseous, then active trading just might |
| be in either a long-term uptrend or | | | | be right for you. |
| downtrend. | | | | |