best stocks to buy and other trading answers

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Post on 19-Aug-2015



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  1. 1. 1 Best stocks to buy and other trading answers Dear followers, Welcome back in my website once again. This is a special report and you are about to discover why. This report deals with the solution of some problems about trading. Some weeks ago, I sent an email to my followers. I asked for a polite reply to it with the description of what was their main problem about trading. I meant that I was available to solve some problems of my followers about trading FOR FREE. Therefore, I asked for a precise question with an email. This was the text of that email. -------------------------------------------------------------------- I would like to push forward your trading skills and the analysis of your doubts about trading. Therefore, I would simply ask for one basic question today: "What is your main problem, ONE PROBLEM, about trading?" Reply to this email of mine by describing it (only ONE problem) and I will solve some of your doubts in the following emails. This is a FREE HELP by me. Nothing to lose and everything to gain. In the meanwhile, be prepared for the incoming new 6-month cycle. Have a good trading.
  2. 2. 2 Fredrick -------------------------------------------------------------------- I have received some answers to this email. I have received some questions about that. There are questions dealing with specific problems about trading, just like the best stocks to buy and others that refer to starting from the scratch in trading and so on. It has been an interesting mix. Therefore, I have decided to give an answer to all those questions with a deep description of the likely solution for each of them. I have share my point of view in my website. It has been a great work and it has taken me some weeks to carry it out. I have listed here all the questions in an anonymous form, so that my answers can be useful to those persons who sent them to me and to all the other followers of my website. The first statement consists of the question that I have received and I have placed my answer immediately below it. I hope that this work can help one another all my followers. Trading is a continuous learning process. Here is the list of trading questions and my answers. Q. How can I find the best stocks to buy? A. I have established my website to give an answer to the previous question and to help people in finding them. What are the best stocks to buy in whatever stock market? I will answer by giving an example of my experience. I wanted to base my choice of the best stocks to trade only on mathematical formulas dealing with prices and volumes and not on fundamental analysis. This was my challenge. I did not found a complete study about technical stock picking that satisfied me enough. I cannot reveal too much of my work and formulas, but I can explain some aspects of my process in finding these very good stocks. A stock is one piece of a company. If this company produces increasing net profits, its value will grow. Period.
  3. 3. 3 There are two kinds of stocks: those, which hit the interest of great funds and those ones that do not interest to them too much. The first ones are the stocks where I can see a spike of volumes (interest). This simple aspect makes me to understand that such a stock will increase in value with high probabilities. Why? Because, a fund has to gain money. It has to prepare and to create a subsequent trend to accomplish its goal. My probabilities of success are higher by doing this. The resulting stocks, obtained with this first screening, are not the best stocks to buy, yet. I want them to be in an uptrend that confirms the increasing earnings of that company. Nevertheless, this is not enough. Best stocks and best companies have something special: the ask for such stocks must be much greater than the bid. I have developed a special indicator that measures the difference between them. The higher, the better. Besides, if a stock is really very good, I do not want to see high sell volumes on the recent tops. This means that it is worth maintaining it. This demand creates a further lack of bid. Then, when I have put aside many stocks that do not pass all my 15 conditions (I have described only some of them here), I put the leaving stocks in order. This order is one of my secret weapons that I do not want to reveal (the 16th condition). I focus on the first 40/50 stocks that come out from such a process. I am the last condition (the 17th condition). A stock has to pass my final judgment to become a best buy stock. All this process is simple but not easy. It works well enough in particular at the beginning of every new 6-month cycle when funds put their money into the stock market. It has been difficult to program all the conditions of my filter that a stock must respect. Many price patterns that I recognize with an eye shut, are almost impossible to translate in mathematical formulas for my stock picking filter. Therefore, there is some manual work required. I have describe the philosophy of my approach. It is quite logical. If I were to suggest you how to find the best stocks, I would say to look at accumulation volumes as the first step. Then, you should understand if a new uptrend is ready to start. Look at the long term graphic and then to the short term graphic. Try to understand if the price is likely to go up with that long trend. Discover what are the patterns both of volume and of prices that have generated huge uptrends for some stocks. Focus on this process. As I am used to say: there is always a good stock to buy in your journey. If it is a best stock to buy, it is better. Remember that a stock is a part of a company. If that company has good and positive net earnings, its stock will behave accordingly and it will rise.
  4. 4. 4 I mean that even if you are a trend following trader, stocks do not move randomly. They move by following the evolution of the fair value of the corresponding company. Remember this important aspect when you will wonder what stocks to buy next time. Last thing. What about the stocks that show little volumes of accumulation before the start of a new great uptrend. There is no sure link between an accumulation area with low volumes and a following great uptrend. I have been studying this problem in the last years and I am keeping on my study. However, I think that the only way to solve this problem is by the means of fundamental analysis. You should calculate both the fair value of the corresponding company and its level of undervaluation. I think that there may be a solution to this problem by only using technical analysis and I am still looking for that. Nevertheless, the real problem is another one: to obtain a great return with a low risk. One stock is a simple instrument to obtain a return. It is up to you to prefer a low or a high risk. Anyhow, I prefer to follow three simple principles when I trade: 1. The first rule is not to lose my capital; 2. The second rule is to remember the previous rule; 3. The third rule is to gain money. These are the reasons why I prefer to buy the best stocks with low risk. Risk management is everything in trading just like in ones life. Therefore, my best advice to you is the following: discover what the best stocks have in common before their uptrend starts. Q. I am biased to the short side, as l have no belief in the rally. Fear of buying an expensive market that will crash at anytime A. I can understand your fear, but I cannot understand the doubt of following a specific trading method, that has proved to be successful in the recent past. The question is: Who the hell can declare that a stock market is overvalued? Can you? If the FED continues to print money, economy will improve. Companies will produce higher net revenues and their fair value will grow. So, their uptrend will continue.
  5. 5. 5 I can say that the stock market is likely to be mispriced now. I mean that it is overvalued according to usual formulas that help an investor to calculate the fair value of a company based on its balance sheet data. However, if your system tells you to buy, you have to buy with stop losses in place and with a clever system of money management. I had the same problem some year ago. I let my feelings to overcome my trading system. I decided to change it by using a simple break out channel system. I wanted that my system, something simple, to show me what to do to me, by not depending on my judgement absolutely. My trading results improved. I think that having a mathematical trading system is the best way to overcome both fear and greed. You need to decide if you want to be and investor or a trader. If you want to be an investor, you have to wait for undervalued prices of stocks before buying. If you want to be a trader, you have to choose a method that corresponds to your character and you have to follow it. In this case, the fair value of a stock is less important. The shorter the timeframe is, the less important the fair value is. You are a trend follower trader; you are not a fair value trader. Period. Besides you write A market that can crash at any time. I can reply: with all the money inside? It is not possible. If a market is likely to crash, you should see a huge amount of volumes coming out from the market on every possible top. Great funds have to exit from the stock market days before it crashes. They risk their money and they do not want to lose it Great sell volumes preceded every crash of the stock market, during a distribution phase. It is not possible that something different takes place. It would be very rare. I think that good trading consists of two main elements: an observation of what happens in a very simple way; a reaction to the market according to what your trading system tells you to do. I try to do simple things always.
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