What The Professionals do, and Don’t Want You To Know
Judging from my email, it is apparent that I have not explained a very important concept very well – one that professional traders DO NOT want you to know about.
Here it is:
You want to be buying stocks on down days in the market – not selling!
You want to be selling stocks on up days in the market – not buying!
I get emails that go something like this:
“Sudarshan, I just bought XYZ stock. Is this a good trade?”
First of all, I can’t predict the future, so I have no idea if it will be a good trade. Second, the stock was bought on a major up day in the market. So, when the market pulls back, it will likely pull the stock with it and this person will get stopped out!
Now, I realize that buying on down days can be psychologically hard to do. After all, those in the media are saying things like this:
“The market sold off hard today as investors are worried about ‘X’.”
“The Nifty is down 100 points today on ‘X’ concerns.”
With all this negativity, it is no wonder why you could be worried! But, you have to learn to ignore the media.
“But what if I buy a stock on a down day and the market continues to sell off?”. Good question, but you could also say the following: “What if I buy on an up day and then the market sells off”!
At least in the first scenario, you got in after a wave a selling has already taken place. That is certainly a lot better than getting in before a wave of selling has taken place!
So…
Wait for a down day in the market. Now run your scans. Look for stocks that are up. Or, if the market is trading at the bottom of it’s intraday range, look for stocks that are trading at the top of it’s intraday range.
You are looking for stocks that have relative strength – stocks that are stronger than the market. Many times, these stocks will just trade sideways until the overall market reverses.
Then you will be sitting pretty. You will have already established a position. Now you can just watch all the novice traders move the stock in your direction.
You NEED these traders to buy after you buy. You NEED these traders to sell after you short.
That is a sensible way to make money trading stocks.
