Stock splits are one of the most powerful stock-moving mechanisms. They became rather sparse when the market bubble burst, but when the DOW and NASDAQ moves much higher, more splits are announced.

Many analysts say that stock splits don\’t mean anything. BALONEY! What they mean is that the \”values stay the same.\” That is true. For instance, if you own 100 shares of XYZ at 100 dollars per share and the company does a 2-for-1 split, the next day you will have 200 shares at 50 dollars per share. The \”value\” is the same because you had 100 X100 which equals 10,000 and now you have 200 X 50 which equals 10,000.

But the analysts don?t take into account the profound psychological element of a stock split. That is the part that analysts cannot measure and therefore rarely mention. At InvestYourself, however, we understand the power of the stock split and bring winning split plays to you every week.

When a split is announced, you often see that stock rocket up on the news. More times than not it falls back after a few days and wanders around fairly aimlessly for a while. Many people call this the \”flat\’ period or \”dormant\” phase.

Then something interesting takes place. A good company\’s stock will begin a rally about 10 days to two weeks before the date of the actual split execution. Why is that? Remember when the split was announced the stock popped and then fell back, often to BELOW where it was when they announced the split? On that first run-up, VOLUME came into the stock. The news was exciting, and tons of shares were purchased in a short period of time.

As the split execution nears, buying volume starts picking up and the share price rises. We call this the beginning of the \”split run.\” Why does volume increase? For number of reasons, but the main one is the excitement returns to the stock. Some people want to own that stock before the \”date of record\” and buy into it for any dividends that might be disbursed. Others want it because they know they will have twice as much stock after the split.

We buy it because history shows that more times than not a great company will indeed run into its split! If you look at hundreds of charts from hundreds of companies you will see the pattern over and over. Unless the market is very weak, the stock chart will show a definite move to the upside right before the split execution.

Sometimes a split runner will run right up to the execution day and other times it sells off ahead of the execution. With this in mind, you should consider taking out your profits the day before the execution day. What do you do with a runner with huge momentum that looks like it could get more the next day? Use your stop loss to lock in profits without too much worry of it reversing and falling

Naturally there is never a rule that works every time, but for the most part getting in about three weeks (15 trading days) before a split executes and selling out the day before or the morning of the split still has a winning rate of about 80%. Those are good odds in any venture.

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Writen By : Larry Potter

Tags: daytrade, daytrader, daytrading, invest, option, options, PROFITS, stock, stocks, trade, trading

Once you are in the trade and your stock has started moving in your direction, you need to extract as much profit as possible. Not being able to do so will make you a losing trader in the long run.

How can a trader lose if he only takes small profits at a time? Profit is profit, isn?t it? Not exactly? Profit of $100 is not the same as a profit of $250. If such profits are followed by two losses of $75 each, profit of $100 will become $50 loss, while profit of $250 will become $100 win.

Do you get the point?

Profits are always followed by losses and if the profits are small they will not make up for the losses that will eventually and surely follow. However, becoming too greedy can turn a small profit into a loss. This will make you lose money in the long run. The best solution to resolving these conflicts is to use trailing stops.

As the name says, trailing stop follows the stock price that is moving in your direction.

For example, let?s say that we have bought 100 shares of company XYZ at $50 per share. We will automatically put our stop loss at 49.50. The price starts to move upwards and reaches $51. At that point we don?t want in any case to get out of this trade without profit. We will now move our stop
loss to $50.50, meaning that if the price turns against us we will hit sell order once the price hits $50.50 in order to make at least some profit from the trade. If the price continues to move in the positive direction we will keep adjusting our stop loss accordingly. If the price hits $51.50 we will move our stop loss to $51.

Once we are more deeply ?in the money? we can start using our stop loss more liberally and give the stock price more breathing space. In our example, this means that if the price hits $53, we could put the stop loss at $52. We are able to do this because we have already made a decent profit and can afford more risk. We can also do this when the stock is in a clear upward trend. Small change in the stock?s direction can mean temporary profit taking, which will be followed by movement in our direction.

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Writen By : Larry Potter

Tags: daytrade, daytrader, daytrading, invest, option, options, PROFITS, stock, stocks, trade, trading

We want to look at shorting for a moment because here we have something that is quite profitable if done right, but can hang you out to dry if not. As you know, one of the problems with shorting is the \”uptick\” rule, where you literally have to wait on an uptick to jump on a short (this means the stock must have advanced some.) That\’s why you rarely, if ever, get the short filled right at the level you want. For instance let\’s say you like XYZ short below the $50 level. Well if it\’s sinking like a rock, and blasts belows 50, 49.95, 49.90, 49,85 and \”then\” finally bounces, you might get filled at say 49.90 or so.

This isn\’t really a problem, it\’s just something to keep in mind when searching for a short. You won\’t get that short right at the support line most times. But you can try and even out he odds in your favor. How? Suppose you love a short on XYZ at $50 because every time it\’s lost the $50 level, it sinks like a proverbial rock. Well if it plunges under 50 and you get no uptick to short, don\’t despair. If you sit tight, chances are the stock is going to bounce and try and regain that 50 level again. This is usually a good time to place that short.

Suppose it does fade 50 and hits 49.87, then starts bouncing. Yes, it\’s possible it reclaims 50 and keeps heading higher, but it\’s more likely that 50 level will now be a resistance level and if you short on the last hurrah push to hit 50, say at 49.95 or 96, chances are good it will not make the breakout and will fade back down. That failed reclaim attempt is generally the best short you can have since the market senses it couldn\’t retake 50 and lets the stock fall.

Now, ETF\’s don\’t have this problem and they are easier to trade on the short side. Take the BBH for example. It is very volatile and since you don\’t need an up tick to jump on it as a short, it\’s often fun to short it the moment it loses a significant support line. Even if it bounces shortly after, you can often pocket 30 cents or more on the initial fade and for the daytraders out there, that\’s fine money. If you are \”new\” to shorting stocks, it\’s a recommendation that you start with ETF\’s to get the hang of it. It will make shorting stocks much easier.

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Writen By : Larry Potter

Tags: daytrade, daytrader, daytrading, invest, option, options, PROFITS, stock, stocks, trade, trading

Do you have a nemesis stock? Don\’t laugh, just about every good trader/investor I know has one particular stock/index/commodity or what have you that just drives him or her nuts. I\’m sure you do too.

Just about every time you try and trade it, the stock tosses it right back in my face and you\’re lucky to get out even. More times than not you take a small loss and then wonder \”what was that all about??\”

We don\’t have the scientific proof that tells us what that\’s all about. We don\’t have any deep insights for you on the topic. We just know that it happens and it\’s a real phenomenon.

The best thing to do when you come across a stock or ETF that just constantly confounds you is to ignore it. Don\’t play with it. Don\’t get your pride all up in a huff and demand to yourself that you defeat this thing, it will eat you alive. There are ten thousand publicly traded companies out there, why on earth would you constantly go to the one that gives you fits?

More times than not it\’s a pride thing. We can\’t accept being defeated. Some of us try and hone our skills by trading the biggest challenge to us. But in all honesty we\’ve done both of these things, letting our pride get in the way, and trying to challenge our own skills. We\’ve lost on most accounts.

If you have a particular nemesis, avoid it. If you are constantly wrong about the direction of say the techs, then don\’t trade them. If you can never get a handle on oil, avoid it. There are too many places where you can consistently get the trends right, and following something that you know
and are good at is many times more enjoyable than kicking your chair and throwing things at your monitor. Don\’t laugh, you\’ve done it, we all have! Avoid the headaches, focus on the stuff that works for you. It\’s a whole lot less stressful.

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Writen By : Larry Potter

Tags: daytrade, daytrader, daytrading, invest, option, options, PROFITS, stock, stocks, trade, trading