THE Best Way To Trade
THE Best Way To Trade
I’m a trend follower. In fact, some even call
me the "Trend Following Moron." I believe that the best way to trade is with the
trend. And, my favorite technique to enter the trend is on pullbacks.
Last Friday, in my column “How To Profit From An Early August Stock Market Slide”,
I discussed how exchange traded funds (ETFs) could be used to capitalize on a
sell off. I mentioned the following as examples: QQQ, SPY, DIA, IBB, BBH, HHH, SMH, and SWH. To
make the math easy (note: ideally you should adjust for price and volatility), let’s assume that a 2-point initial stop, 2-point trailing
stop, and 2-point initial profit target were used. With that said, let’s look at how these ETFs
could have been played.
Diamonds Trust
(
DIA |
Quote |
Chart |
News |
PowerRating):
Semiconductor HOLDRs
(
SMH |
Quote |
Chart |
News |
PowerRating):
Software HOLDRs
(
SWH |
Quote |
Chart |
News |
PowerRating):
S&P “Spiders”
(
SPY |
Quote |
Chart |
News |
PowerRating):
Nasdaq Q’s
(
QQQ |
Quote |
Chart |
News |
PowerRating):
Internet HOLDRs Trust
(
HHH |
Quote |
Chart |
News |
PowerRating):
Biotech HOLDRs
(
BBH |
Quote |
Chart |
News |
PowerRating):
Nasdaq Biotech HOLDRs
(
IBB |
Quote |
Chart |
News |
PowerRating)
Does it always work this well? Of course not. However, as
you can see, it’s worth playing for when it does.
Once again, if you’re new to momentum-based swing trading and would like more information on the basics such as trend, entries, and money management, email me and I’ll be happy to send you the primer section from my second book.
Also, if you are new to shorting, I have a primer I on that too.
On Thursday, the Nasdaq sold off for a solid trend day
lower.
This action puts it below the July lows.
The S&P also sold off hard.
This action puts it right at its July lows.
So what do we do?
The trend is down, so we
should be shorting right? No, that opportunity was on the last pullback. The
market is now oversold. Therefore, take partial profits and trail stops lower.
No setups tonight.
Housekeeping
Once again, I remain backed up in emails. I promise
to catch up as soon as possible. Thanks for your patience.
Also, almost all of my attachments (e.g. the swing trading primer,
TKO rules, etc…) sent to “Hotmail” addresses seem to get bounced back. Therefore, if you have Hotmail account and did not receive a
reply, try again with another address (FYI:. Yahoo! mail is free and works
great.)
Best of luck with your trading on Friday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. My new 20-hour course is now shipping.
Click here to learn
more, or to order..