Another sound article courtesy of one our users, Angell. We welcome member submissions and enjoy publishing your work if we feel it offers good teaching points and this one certainly does. Articles can be submitted to us at info@stockhaven.com
“I’ve seen many posts, and wondered myself, why so many times I end up selling at my stop and only breaking even or losing money on so many of my trades. One of the biggest reasons, in my opinion, is that we are playing with our scared money. Although it is good practice to hold to your stop, whether mental stop or actual stop set, it is those who are confident, and those who are able to do daytrades and can get right back in if it does turn and make a run up, it is those traders who are not shaken so easily if they decide to hold thru and realize the gains.
It is very important that those with smaller accounts, are sure that you are entering trades at a strong support area of any stock trade. With smaller accounts you will also need to sell at just before that next resistance line unless there is huge volume that will push thru it.
Spend your “off trading time” practicing charting. We get watchlists everyday from numerous traders. Take each chart from those watchlists and draw the support and resistance lines. Look at them on each of the time frames for that chart. My suggestions are the same ones that stockhaven uses in our charting classes. As he is charting for us, he looks at those charts in a 5 minute, 15 minute, daily back to a year, and weekly back multiple years. As crazy as it seems, a stock will fall on some of the same support and resistance lines that it liked six months, a year, and even two or more years ago. I find that fact just amazing, that stocks do that quite reliably.
I think the reason for those stock levels are laid down by common trader behavior. Where a stock was when a promo or news alert happened there was a surge of buying and numerous traders then took profits at 10% (a common activity).
If enough traders did that, it may show up as a resistance point. If another surge of volume comes in and causes a continuation of the run, that point becomes a support point. Sudden intense interest in or another big promo in another stock, may cause a withdrawal of interest that will leave that as a resistance point. If a lot of traders are left there as supply, when the stock again reaches that point and those traders then take their profit because they have been holding and stuck, just ready to “get out of dodge” so to speak, it reinforces that level to an additional strong support / resistance area.
Whatever the reasons are, the history begins to be layed down and subsequent trading follows, laying down new support and resistance which are often repeated at those common areas of profit taking. Understanding and knowing those historical support and resistance levels can help you decide your plan for entry and exit when you decide to trade that stock.
Those who have small accounts would be best served to adhere to: buying at the nearest support and sellng at nearest resistance points, growing their account in smaller increments. It is very frustrating that we have the 3 day settlement rule. It makes it hard to trade often enough to satisfy our desire to play and grow that account to the point where it can comfortably be split into tradable amounts. I would like to see that point being around the $4000 amount. That way trading can continue the growth by using 1/4 of the total account for each trade, letting that portion settle on it’s 3 days, while moving to the next 1/4 of account for another trade and letting it settle for the 3 days, continuing that in a “round robin”; and moving from day to day, always having a portion available for a trade while the balance is taking it’s settlement.
Every day we are in chat, hopping into trades that are popular without checking that stock’s charts first because we are trying to get in before being left behind. This behavior is a form of chasing that is hurting many traders accounts and has hurt mine as well. We hop in, having no idea of where support or even the next resistance area is, where we should be getting out, and then get stuck or sell at “even” or take a loss. Lack of having any plan by trading this way is a very bad habit to get into and may at some point cause you to leave the trading arena until earning outside funding again or in some cases, leaving trading for a long long time, if not forever.
So, since it is very important for traders that have those smaller accounts, please be sure that you are entering trades at a strong support area of any stock trade. Remember that with a smaller account, you will also need to sell at just before that next resistance line unless there is huge volume that will push thru it. Check to be sure that you are planning a trade in a stock that has enough of a “risk to reward” spread that you can actually make some money playing that trade.
Gain the practice and knowledge by spend your “off trading time” practicing charting. We get watchlists everyday from numerous traders. Take each chart from those watchlists and draw the support and resistance lines. Look at them on each of the time frames for that chart. Attend evening classes or watch the new videos where stockhaven shows, as he is charting for us, how he looks at those charts in a 5 minute, 15 minute, daily back to a year, and weekly back multiple years. Practice until you are proficient at quickly finding these essential entry and exit points and i truely believe that you will soon begin to find that little account isn’t so little anymore.
And as always …. have fun and good trading to you all!”
-Angell
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