Whoodi how do u know?

[Kentaro]

How do u know when a stock is going to go up? what signs do u look for? And how do u know a stock price is going to drop?

[whodi]

I will answer this one for you after the market closes for you Kentaro, and I am sure some of these other good traders LG and Goods can help out with this one as well if they aren't to busy.

[The Little Giants]

Kentaro, I used to work as a hedge fund manager before I got into the mortgage industry and one thing I learned that was a key to development of market knowledge is to always realize that you know very little. What that means is that no matter how much you read about charts, patterns, financial well being, etc... The market runs the show and goes where it wants to go.

I would suggest that you read extensively on technical analysis which will give you some insight on typical patterns. I personally believe that "Beyond Candlesticks" is the greatest technical book ever written. Also, get books on market psychology and general market knowledge. Always stay extremely humble and discipline in your trading. Sell losers immediately and set stops tightly until you become an expert. Let your winners run while taking small amounts of profits off the table.

I can't stress how important it is to read a lot while staying humble. I have seen a lot of people read a few books and assume they are experts only to lose their shirts in a matter of months. Good luck!

[duckster]

Very nice advice LG.

Add to that,,, throw your human emotions in the trash can, the market will feed off them. Psychology is huge. DISCIPLINE is a must, without it you get eaten alive. If your not humble now, you will be if you play the market. Don't listen to others about "great" stocks and how something is gonna skyrocket, half the time you will be buying their shares. Don't be a pig, they get slaughtered. LEARN HOW TO TAKE PROFITS AND LEARN HOW TO SELL IF IT GOES THE OTHER WAY... KNOW WHERE THE SELL BUTTON IS! There are no traders that win all the time. The stock always knows, your neighbor doesnt. The market changes all the time, it is a constant adjustment. Discipline is the #1 thing.

BTW, LG, you know any good books that deal direct with market psychology??? thx

[whodi]

Originally Posted by Kentaro

How do u know when a stock is going to go up? what signs do u look for? And how do u know a stock price is going to drop?

Sorry it took a while to respond. These guys pretty much hit on a lot of points I would of mentioned. You have to be able to read charts to learn and understand what the patterns mean, which will show you bullish and bearish signals. At the same time, you can do all the technical analysis to perfection but there are factors that you can't control that you have to take into account, such as NEWS. News will drive a stock up and down along with earnings, which is really part of news and then all the researching is thrown out the window and you start over. Once you learn patterns and you see stocks starting to break through resistance, it will usually go up and you will want to buy, and if it breaks support, it will usually go down and you will want to short it. Once you start reading books about the market and technicals, along with candlesticks, if you really want to learn patterns, you will start to understand and be able to speculate stock movements. Doesn't come over night, so if you start buying books and reading, start paper trading stocks, which are not real trades but take them serious, so you can study what you saw to make you buy or short the stock. If it worked out, GREAT, and if it did not, go back and try and figure out where you may of made a mistake and try and correct it for the next trade.

[Goods]

Great advice from everyone.

I would add that certain market days will lead most stocks up or down. When there's a catalyst that drives the market up or down 100-300 points, the emotion runs very high among traders. Try to recognize which stocks move most with news. People losing money will get desperate when hit hard and the panic feeds on itself. People will sell everything to stop the bleeding or buy anything to not miss the boat. The pros wait for those people to flinch.

For example: a surprise rate cut will drive Bank of America or Countrywide up strong. A negative jobs or housing report will drive them down.

Patterns are self fulfilling. Enough people watch patterns to see that when a stock breaks out of an ascending triangle, it's time to buy. Those people buying the breakout make the breakout that much stronger and more people jump on board. The key is, no one thinks the same way. I see a buying opportunity where the next guy sees a short.

Stocks will also move with their peers. When YHOO and MSFT came out with strong earnings, you could have jumped on GOOG or EMC to ride the wave. When gold or oil prices head up, expect GG or XOM to head up respectively.

All housing stocks and mortgage companies eat it whenever one of them comes out to say it's been a bad year ala CFC. I'm expecting AIG to have huge writeoffs on bad loans when their earnings roll around early Nov. because, I haven't seen one yet that hasn't. But I'll keep an eye on AIG articles that might change my mind before earnings.

Outside of that, reading patterns is a lot like counting cards playing blackjack. It's not a given you'll win but you greatly increase the odds in your favor.

One last thing, stocks almost always swing back and forth. I can't tell you how much money I've eaten trying to chase a run. If there's a big gain, expect a swing down and vice versa. How much of a swing and when depends on a lot of the stuff you'll read in the books. The swing is where the money is when it's short term or daytrade.

I recommend Alexander Elder's "The Complete Trading for a Living" to start.
Elder's a psychologist who brought his knowledge to the market. Great insight on why people trade how they do. Easy to read.

I'll be picking up LG's recommended "Beyond Candlesticks" and a good Level II book in the next week.

[kiwimike]

Great advice guys and thanks alot for all the input ...i'm still paper trading and losing alot!...lol...but at least it only paper trading and i'm learning as i go. Cheers for the further advice, much appreciated.