A Dose of the Real World
Over the past
weeks, I have been bringing you along in your understanding of
the stock market and how you can make extraordinary profits
in it. Would you like to see how this information is applied in
real life trading? Take a look at the following chart.
Recall the
steps that you’ve learned thus far. The first
thing to determine is the trend of price. The trend is clearly
up as shown by the blue trend line. This tells us that we will
generally do best by trading in that direction. Next, we look for
a short term departure from the trend. This will be demonstrated
by the bouncing red line at the bottom of the chart. When it gets
below the lower horizontal blue line we know that enough selling
within the bigger uptrend has taken place to be significant to
us. At this point a trade is imminent. On July 1st I wrote the
following to my students, “Entered long QQQ August 29 calls
today.” My entry price was $1.75.
On the next
chart, you’ll
see the exact trade entry point.
The open of the trade was made as prices began moving back up
in harmony with the established up trend.
July 1st was
a Tuesday. The markets were closed on Friday July 4th so the
trading week
was shortened. On Monday July 7th I sent
an e-mail to my students telling them that I was going to close
this trade. When I did the price was $3.00. So a profit of $1.25
was realized in the space of 3 trading days. $1.25 doesn’t
sound like a lot? Think in terms of percentage to get an accurate
read on how the trade went.
This particular trade gained 71% in 3 days.
As
you can see, even a basic understanding of how to read the charts
can produce incredible effects for you. In reality, a basic
understanding is best. Simplicity has an elegance all its own.
What could be
simpler than 71% on your money in a few days?
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