Your Questions About Successful Trading Strategies

Mary asks…

What are some good resources on swing and position trading in the stock market?

What are some good websites and books that cover strategies, tips, and info on successful swing or position trading in today’s stock market?

John answers:

Good books (to start with);
Mastering The Trade, John Carter
Trading In The Zone, Mark Douglas
Market Wizards, Jack Schwager
The Wallstrip edge, Howard Linzon
Technical Analysis Using Multiple time Frames, Brian Shannon

For good free scanning;

Other sites;

Good luck. This stuff is hard work. Fun. And if you’re lucky…. A passion.

Daniel asks…

What’s your favorite options trading strategy, and why?

How do you usually play the options market? Selling naked puts? Covered calls? Buying deep in the money calls? Spreads? Straddles? What strategy are you the most comfortable – and successful – with, and why?

John answers:

I’m a bit like The Shepherd. I’ve been selling a lot of naked calls & puts lately. I look for opportunities in low priced stocks ($35 or less). This minimizes the margin requirements. I seem to recall that most options expire worthless rather than being exercised.

Deep in the money calls can be good, depending on the stock.
A while back I used this to make some good money from Google.

If you’re buying calls or puts, generally stick to months a ways out. A lot can happen in the short term to act against you, but if you have time, things can turn around.

Options require more attention in my opinion than stocks due to the volatility.

Remember the cardinal rule of options trading: Never commit more money than you can afford to LOSE!

Sandra asks…

What would be a good stock trading strategy for using a Trailing Stop ?

Want to trade stocks short-term (online) and need advice from successful traders. Thanks for your time and advice!

John answers:

Obviously you need to figure out where to place the stop initially before it starts trailing. There are a couple choices –
1. Select a price some stop loss % (2, 3, 4, 5% – whatever you’re comfortable with) or
2. Base your initial stop on a support level.

Method 2 is what is normally used in Forex trading. In stocks I use mental stops as opposed to actually placing the order but I’m reviewing my charts a couple times a day so I know where my stop-loss is at and I have access to a computer all day. The concept is that if a stock starts to drop it will tend to halt its decline at a support level, at least temporarily. If support holds, price will bounce off of it and start rising again. If support breaks down, price will likely continue to fall. Price will probe the support and go below it temporarily then rise back to or above it while it is testing support so you want to have your initial stop at some tolerance below the support level.

Here’s an example of how to set the initial stop –
Refer to the following chart:

Once you decide on a stock, determine the support/resistance levels as shown by the horizontal red/green lines. Near todays action there is support/resistance at these prices:
3.92, 4.00 (natural), 4.19, 4.40, 4.61

Let’s say you wanted to buy at 4.15 on Wednesday. There is natural support (even dollar amount) at 4.00 and 3.92.
1. Determine what your loss tolerance is – let’s say 5%
2. Determine how much tolerance below the support level you want to be ~ 2%
3. Determine where 2% is below support – 4.00 minus (4.00 * 2%) = 3.92
4. 3.92 would be your stop.
5. Determine how much of a loss you would take if stopped out – about 5.5 %
6. Determine if 5.5% is within your loss limit. If so, you would place the stop at 3.92 and if not, you have to decide whether to move the stop closer to support (increases the risk of getting stopped out) or not make the trade.

Once prices starts moving up, you have the choice of changing the stop to a trailing stop or to calculate a new support minus 2% stop price and manually change the stop.

All this may sound like more work than you want to do but after you do it 5-6 times, you will start to recognize the stop prices in a glance.

Paul asks…

Trend predictions based on oscillators?

I am trying to develop a successful trading strategy. So far, I plan on using RSI/stochastic criteria as well as positive/negative divergence. Are there any other indicators that would help me discern a buy/sell signal, specifically related to volume or support/resistance levels? Or anything else you can think of that I haven’t already? Thanks for your help! Share the love 🙂

John answers:

Check out OBV (On Balance Volume), and as a further check I use Profit & Figure charts. Mostly I depend on fundies, tho.

Donna asks…

Day Trading Investing Stocks I Need Two Or Three Proven Strategies?


I have been Daytrading the Nasdaq, Amex, Nyse, BB and PK stocks using Etrades level 2 software. I have had success trading news stories, earnings Good/bad, Share Buybacks, gaps up and down, buyouts and FDA news approvals and non approved.

I have read dozens of books and been on courses regarding day Trading but the best trades I have made I have figured out myself. I Am Looking for more specific Individual ideas that others may have found successful.

For instance I watch the news feeds all day looking for key words in news that will trigger a price move or I’ll spot a loser and follow it for 2-3 days till it’s almost dead and then buy it as it bounces back, another good one is following the top 10 risers of the day till 10.10 am and then buy one that carries on it’s rise. So anybody got any Good Individual ideas I will appreciate it.

John answers:

This is amazing, I have been wanting to hear about someone who is actually making money day trading! I’m in college and I haven’t had the chance nor the money to start yet but I would love to do this for a living. From my research, I found that the news about mergers & acquisitions, clinical trials, and all you mentioned sends stocks skyrocketing.

The website below has software that scans the news feeds for you specifically for day traders. It is programmed to look for the key words that causes big moves in stock prices. If there is any advice you could give me before I get started I would love to hear it.

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