After hours trading is not for everyone and I don’t recommend it unless you’re a savvy investor or you desperately need to get into or out of a stock.

The reason is that most market makers will widen the spread after the market closes. This means you’re going to get a higher ask price if you want to buy and a lower bid price if you want to sell. Market makers do this to milk the desperate investor.

There are cases where trading after hours could benefit or save you from further losses. If significant news comes out after the close and then buying or selling after hours may be required. For most cases waiting for the next day to put your order is the best choice.

The thin volume of most stocks after the market closes will not give you an advantage.

Over The Counter Stocks and NYSE stocks don’t trade after hours either.

Here are 2 simple rules to trading to keep your safe. 

Do not begin to explore the markets or even invest if you cannot follow a rule.
 
Using the following rules could help you in the market:
 
1. Invest your capital wisely.
 
Do not expect to get rich quick by investing all your money into one stock.
 
Enough knowledge and a small amount of capital can make you a lot of money in ten to twenty years.
 
Be conservative with your investments and don’t gamble like a wild man. There are so many opportunities in the market. You have to speculate and explore which opportunities are worth taking and to not plunge in completely.

If all your money is invested into one opportunity, what happens if that opportunity does not work out? You miss the next opportunity just around the corner. Read the rest of this entry »

Each investor of the stock-market is in front of an enemy. A perverse enemy that will drive away millions of investors in the stock-market and has the capacity to even defeat the strategy of an experienced investor.

Who is this enemy? Emotions. The emotions are the impelling force behind every cycle of the stock-market.

If emotions were not present in the stock-market, the investors would harvest the rewards only based on the state of the economy and professional retailers would not benefit substantially from the emotional errors of others.

An example situation: You have prepared, read books, traded in the papers, and now you are making your dream come to life by investing in the market where you can make great money!

You approach losses in a mature manner like part of the learning curve. You have experienced a great deal of them but your wins are still are in the lead, thanks to the loyalty you have kept with your chosen strategy.

Arriving home from work after sitting in traffic, you find changes at home. You know that you must follow your strategy, but your stress has taken over. Read the rest of this entry »

First off here is a formal definition for a Stop Loss Order. An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor’s loss on a security position.

So if you place a stop loss order 15% below the buy price that would limit your loss to 15%.

Using a stop loss is a little more complicated than just placing an order. Blindling placing a stop loss 5-10% your buying price is useful in some situation but could cause you to take uncessary losses at time.

The first thing you must determine is daily range the stock makes, if a stock usually has a tendency to drop .50 each day and come back up you will want to place your stop loss below this price so that you’re not prematurely stopped out.

Second you must look at the the resistance and support level on a stock. If a stock has bounced off a certain level 2 times it’s possible it will bounce off this level again. You will want to place your stop price slightly below this level, so that if the support level fails you will get out of the stop. Read the rest of this entry »

I’m always searching for great traders and to learn a little about their strategies. Recently I had the opportunity to do a short email interview with a trader from South America who had made $50k in just one month.

He considers himself a trend and basket trader. Here is how it went:

Q: Can you tell me alittle about your trading strategy?

A: I am scalper or sometimes position day trader so I like looking trend stock and add size (pyramid) but when I find a good trend day I am a basket trader.

For example, I will be buying a basket of serveral stock of 100 shares and if it goes good so i will buy other 100 …..

Q: Lets say you find a good trend and you buy a bunch and it goes up and you buy some more, when do you feel like you will take profits and if it drops where do you take losses at?

A: I like technical analysis so I look chart SPY or Dow and trade with them. Sometimes if its strong day I let it run till the close , or sometimes I look for target level of spy.

For Stop I use technical, sometimes I have an amount dollar of stop or level of spy or dia.

The last month some days I bought or sold baskets the last 10 minutes of market, strong or weak day.

For example a basket of 60 position of 600 shares.

This lesson also points out basic support and resistance strategies. As with any type of charting strategy it is not exact science but the use of it can increase your probabitlity for profits.

This is sometimes called the box strategy which was made popular Nicolas Darvas in the Book – “How I Made $2,000,000 in the Stock Market.” written back in 1961.

If you view the chart below on ANR you will see that it bounced off the $14.50 level 3 times and moved up to a resistance of $22.50. Obviously when it happens the first time you won’t know that these are support or resistance levels until it happens again.

After the third bounce it’s a good chance it will eventually test the top resistance level again. If it breaks above the $22.50 level, this an be called a break out. To play this correctly you would have to give yourself alittle room on the down side.

1. Enter the stock before it makes the second bounce and give yourself a stop loss of atleast .50 in this case incase it doesn’t bounce exactly off the first support level.

2. Enter the stock after the second bounce and it is headed back up with a stop loss at the bounce level.

3. Exit the stock after it test the top levels and failed to break it.

4. If the stock breaks the top risistance and continues upward, use the resistance level as a stop loss, or use a trailing stop if the stock continues much higher.

While most people would probably steer clear from potentially bankrupt companies right now. AIG was a perfect trade for the short term investor. After the news of the bail out and the stock failed to go lower it was a no brainer. I’ve been trading AIG up and down and sold most of my shares today near $5.

I am looking to get back into AIG on any weakness.