Use PowerRatings with TM’s 10 Rules for Successful Trading

November 29, 2006
Darren Wong

Today’s

PowerRatings article will focus on Rule #6 of TradingMarkets 10 Rules For
Trading.Â Rule #6 states:

Reduce Overnight Risk; Buy Indices
And Sectors Instead Of Individual Stocks.Â

Equities are the the
backbone of the US economy and most of us were raised trading stocks. But,
stocks have more risk than indices, ETF’s, Holdrs, and iShares. Here’s why.

Let’s look at two
extreme examples. The first is with Biogen, a large, well established Fortune
500 company. In February 2005, Biogen voluntarily withdrew its new Multiple
Sclerosis drug because two patients on the drug (at that time) passed away and
their deaths were linked to it. Overnight, with no warning, and no possible way
to be protected, the shareholders of Biogen lost billions of dollars. The stock
lost over 35% overnight and no one could do a thing about it.

Now let’s look at an
even more calamitous event. On September 11, 2001, two planes flew into the
World Trade Center. More than 2000 people died from this event. The stock market
closed for days because of this. When it re-opened, the SPY’s (S&P Depository
Receipts) opened about 8% lower. In spite of the fact that 9/11 was far more
catastrophic than the Biogen event, investors and traders who were long SPY’s
lost far less than those investors and traders who were long Biogen.

If you are looking to
minimize the overnight risk in your trading, focus on ETF’s, Holdr’s, iShares
and other indices securities.

Each day we rank Indices, ETF’s, Holdr’s, SPDR’s,
and iShares through our historically proven PowerRatings system to determine
which sectors/indices are ready to move higher over the next 5-8 trading days.Â
To see our full list of ETF PowerRatings,

click
here.

Here are a few charts from today’s top-rated
ETF’s:

Internet Holdrs
(
HHH |
Quote |
Chart |
News |
PowerRating)

PowerShares
Water Resources
(
PHO |
Quote |
Chart |
News |
PowerRating)

iShares Russell Midcap Growth Index Fund
(
IWP |
Quote |
Chart |
News |
PowerRating)

From 1995-2005,
stocks with a PowerRating of 8 have outperformed the S&P 500
index on average by an 8.3-to-1 margin, while a PowerRating of 10 doubles that
performance to 16.3.

PowerRatings also help indicate a stock’s
downside as well as timely short-sale entry points; PowerRatings of 1 and 2 have
on average lost money over the next week. A PowerRating of 1 typically
underperformed the S&P 500 by a 5-1 margin. Obviously, you should ideally be
looking to buy high PowerRating stocks and avoid (or short) low PowerRatings
stocks.

Find tomorrow’s winning stocks today!

Click Here!

Attend a free class on how to use

PowerRatings, presented by Steve Primo, our Director of Education.

Darren Wong

Associate Editor

darrenw@tradingmarkets.com

Want a free month of PowerRatings?
Send us your PowerRatings
strategy and receive one free month of this exciting trading tool. If you are
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subscriber, you will receive an additional three months if we publish your
strategy.

Reminder: We are in no way recommending the purchase or short sale of these
stocks. This article is intended for education purposes only. Trading should be based on your own understanding of market conditions,
price patterns and risk; our information is designed to contribute to your
understanding.

Use PowerRatings with TM’s 10 Rules for Successful Trading

BUY THE FEAR, SELL THE GREED

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