Bulls To Bears: Trading and Stop Losses

A stop-loss is a commonly placed market order that's entered to help protect investors by triggering a sale on a stocks position once it reaches a certain price. Today we are going to let you in on a little trading secret. We are going against the grain here and try to explain to you why stop losses are the single biggest factor why most novice and inexperienced traders lose money in the stock market.

The reason behind why most stock losses probably occur, is before a stock trends higher, it typically takes a dip and trends  lower and nervous people sell. It is important for you to grasp that market makers, specialists, and experienced traders are out to make money for themselves or their firms. They are out searching to make money from your inexperience and they all have access to resources, tools and information that you don't.


Now listen, these sharks see your open positions sitting out there and they know that you are willing to sell to them at your stop price (the order is in) and they are searching for these easy pickings, to stop you out and make money from your mistakes. More often than not if they are planning on taking a security higher - they will drop the bid first scooping up your stock taking you out at that stop price. They want to buy it cheap and they know where to get it. Then they will proceed to move the stock much higher and are happy to own your shares that you were offering up for sale. And guess what? Now your out of that trade, with a realized loss!

So, the lesson here is, If your frightened about a trade or scared to lose your money or just uncomfortable with that trade then "sit it out" don't do it. We see this scenario take place time and time again. So, it is better that if you feel the need to have a stop-loss in place, put a looser stop-loss of maybe 30% to 35%, as to not make it too tight so your easily stopped out. There are people out there who are looking for people with tight stop losses. These professionals know the stock market very well and are scouring it looking for tight stops and looking to capitalize off of it. We tell our subscribers to generally try and keep stop losses on the looser side when possible.

Using a stop loss is like going into a casino sitting at the poker table and showing everyone at that table your cards, including the dealer. So don't use a tight stop loss. It is the easiest way to ensure that a wall street professional trader will pick your pocket. We see this scenario time and time again. It is paramount that you understand that a majority of your losses are coming from stop losses that you have in place right before the stocks begins to go higher and you are the loser. I'm sure this has never happened to you?

In our opinion the best stop loss that you can make for yourself are mental stop losses. But you must be diligent and stick to your trading parameters. We will go on the record here and tell you that tight stop losses are the single biggest mistake novice traders make when they start trading stocks.

I will stress it again, market makers have a lot more data and tools at their disposal than retail traders do. They are able see your order entries and they have the power to move the markets against you. Not to mention stop losses can’t guarantee you complete protection against even market losses. But they do increase the odds you will miss out on the upside all together, plus they increase trade costs. Also, there is no evidence to support claims that they produce better results, but there’s plenty of evidence to the contrary. It is better to start to think of stop losses by their contrarian name that describes them better " stop-gains." 

In addition, because stock prices tend to fall so rapidly, most stop losses entered can't be filled quickly enough and many investor's stocks are sold out at prices well below their triggered stop price. We see it often enough, that most stocks will then rebounded quickly, making the situation even more painful for the traders who are stopped out at the bottom.

Another major worry in regards to stop loss orders is once your stop order is triggered, it turns into a market order. In a volatile quick moving market, the stop price could be acquired and the next offer price could be executed substantially well beneath that stop price and it will result in larger losses than initially expected, which is exactly what you were trying to avoid in the first place by using the stop order.

To recap, try to avoid getting stopped out prematurely, you always want to give yourself some wiggle room in regards to your stop loss entries. Otherwise you risk getting stopped out and missing the move entirely, even worse, handing yourself a realized loss costing you money.

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Bulls To Bears: Stock Trading and Politics


Politics, news and market moves. Whether it's a terrorist attacks abroad, threats of war from foreign leaders, elections or acts of mother nature, there are many unexpected news events that have preceded huge sell offs in the stock market. In the face of much of this distressed news throughout the past decade, the Dow has continued to soar and make higher highs. How was that possible? There is a intertwined correlation between political situations and the stock market. Sometimes politics seems to have a direct impact on the market movements, other times none whatsoever.

Take the “Trump Tsunami,” for instance, when the stock market exploded and skyrocketed immediately after President Trump won the 2016 presidential election. In general though, politics has very little effect on the stock markets long term movements, other than short term spontaneous pop and drop reactions.

When considering whether politics has impacted the market or not, it is important to differentiate between causes and effects. Investors are sometimes pumped up by an election of a particular candidate, such as Donald Trump, who seemed to have effectively shifted the political wind of the international order. The current state of the modern media environment mutes much of the impact of most events in the market. There is so much biased news today put out by certain media outlets that the market doesn’t seem to be impacted by a majority of it. By learning to tune out the noise from what's relevant is an important skill to have to becoming a great trader and investor. I also need to remind you that the financial media's main mission these days is not the quality of the news to help you succeed as a trader or investor, but instead to generate as many digital clicks or ad sales they can get.

One thing we know for sure, the stock market does not like a lack of confidence and the market been hammered many times amid a series of potentially volatile political events, including the debates over raising the debt ceiling, possible government shutdowns, developments over trade and, factors other than political ones are always at play. Among the many factors that influence stock market pops and drops are company earnings announcements, interest rates chatter and miscalculations on the world's economy.

It is prudent to stay aware of the reasons for a markets pop or drop, and not attribute too much meaning to a single particular event. Again, the real mover of markets are revenue and a companies earnings growth, If big corporations continue to move the needle forward and continue to grow their revenues, the market will trend higher.  We view corporate earnings as a bullish or bearish indicator. If they are better than anticipated the markets will move higher. Not so good, it will trend lower. However, smaller traders shouldn’t get too caught up on every pop and drop of the stock market, instead they should look at the big picture and keep their overall investment strategy in focus, continue to practice good and prudent trading habits, while you weather market shifts and political whirl winds.

We tell our members not try to political proof their portfolios. If you think about several political crisis over the last few years - like debt ceiling negotiations between political parties, when you take a closer look you'll notice they much of it turned out to be non-events for the market. No matter who is in the White House, there are plenty of stocks at any given time that are good, worthwhile investments. We advise our subscribers to remember that it is earnings, not politics, that moves the stocks. The few times politics really affected the ebb and flow of the markets, was when it modified the economic landscape where corporations were doing business. So, as a rule of thumb - it's not until the political policies materially affects the way a particular company or sector does its business is there a cause for great concern. Investors just need to learn to put all the short term noise on the back burner.

Yes, sometimes politics does affect the stock market, but the real reason for the political effects of the market is when politics and the stock market are economically related, like when the tax cuts were announced, it was positively related to the markets move higher. It is pre and post elections, like in todays environment, that investors must keep a wakeful eye on breaking developments. For many stock investors, politics still remains a huge factor in their investment making decisions.

We  should  all keep in mind that political shifts can move markets, but even under booming economic conditions and vigorous fundamentals the market regularly experiences 2 to 3 corrections a year. So, remaining diversified in the correct stocks is always the best method to help ride out the inevitability of a large swing in the market. As a stock trader you need to follow your convictions. But, your opinions and beliefs need to be able to change in the blink of an eye, if need be. Will Congress or state legislatures pass a law that will have a negative impact on a particular stock owned?...an industry, a sector, or the economy as a whole?

In a nutshell, politics is growing more personal, polarizing and insidious. This will likely get worse before it gets better and as the Republican and Democratic mid-term elections get under way, get ready for an ugly scene. The campaigns may be interesting to watch, but they not going to be pretty ones. How will these political adjustments impact the stock market? If you have a solid investment plan in place, like the methods we are executing for our members, with adequate diversification, we say that you make no moves based on supposed election theories. We are in uncharted political territory these days. So, sit back relax and watch the spectacle unfold, but hold on tight! Outcomes and predictions based on political shifts this fall are just pure speculation.

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Bulls To Bears: Trading and Market Manipulation

Stock Market Manipulation is a malformation of stock prices by brokers or groups or institutions. Market manipulators make the price of stock go up or down when they want the ability to buy or sell large quantities of shares at the best prices for them. "After all, no price is too low for a bear or too high for a bull!"

When the "one that sits behind the curtain" Level 3 Traders/Market Markers, (Level III highest level of quotes system provided by NASD member firms, who have the ability to enter quotes, execute orders and change prices), when they start accumulating large amounts of shares in the open market- that buying tends to have an impact that usually moves the stock price of the intended security higher.

Now, that is not good if you are buying large amounts of shares and you don't want to pay a higher price per share for them. So, by the time they're done buying a few blocks of stock, the price could have gone much much higher in process, and the profit they were hoping to make on that block has decreased before they done buying. The same if he is trying to sell, it would drive the shares down lower and he would get less money per share. That's not a smart trading philosophy either, if they want to get better price on the sell side.

To accomplish this kind of an objective a shrewd trader will often dump a sizable position of their stock (acting bearish on it) first into the open market to try to achieve a result. "Panic Selling" which will cause the stock to decline further.

Ponder this scenario for a moment: A Market Maker sells a significant quantities of a particular security they make a market in  and the stock price begins to nose dive, then other stock holders get spooked and they also begin to sell their stock as well. Now everyone's panicking and the stock is down 30%. The manipulator wins and can now try to quietly buy back this stock now without being noticed (bullish), and without pushing the price back up again and/or if the manipulator sells significant quantities of a stock (let's say 100,000 U.S. Steel shares - NYSE:X @29.00) and the price DOESN'T go down, then that means someone else out there must be buying similar amounts of X's stock as it comes onto the market. - "some other big trader somewhere wants this X stock badly at this price too, so share prices are likely to spike." as the price of the stock starts to trend higher (as the first manipulator keeps buying it, supply will start to become less, so the price will inevitably continue to rise), you often find the manipulator then starts selling again. Why you ask?   
  1. He wants to know if the other manipulators out there are still interested in buying the stock. If so, then the price shouldn't fall by much; the other manipulators will be buying up the stock that the 1st manipulator is selling. That's what the 1st manipulator wants to see happening; he needs other big traders to help drive prices higher, as otherwise there will be no one for him to sell to later on.

  2. The manipulator also wants to know if there are any novice stock holders out there who are on the point of selling, who could be convinced to sell if the price starts going down further still. Price moves down; those uninformed stock owners sell their stock; the manipulator gets to buy them back without moving the market, and he does so at a much cheaper price than if the stock price had kept going up. Once the manipulator has consumed all the supply of stock out there, anyone who wants to buy can only buy from the manipulator, who can then start to raise that price on the stock.

    (FYI, you notice that I mentioned US Steel (X); that was just a stock I chose today for this newsletter article, and we sometimes follow X or trade it, but at this time we don't own any X common stock or X options at this time, for full disclosure.)
Both manipulators involved have very clear intentions, to move the price of that stock up and then distribute shares that he has purchased in order to take the stock price higher. There are occasions when the manipulator would also be asked by a group of investors to sell the shares held by them at higher prices along with the shares that he might have accumulated as well.

Manipulating stock prices can happen quite easily, even unintentionally and it takes place more often than you think. Achieving it in a perfectly legal way is no more difficult, depending on how much trading power one has. Individual stock investors just don't have ready access to these types of techniques and consequently, they often end up on the wrong and losing end of these scenarios.

When trading situations like this, a little knowledge can go a very long way and that is why having a battle tested company like BullsToBears.com in your arsenal makes sense. We scan the market for these algorithms when they start a feedback loop with each other, this typically results in the wild swings up or down. So, we issue the buy alert and once markets moves higher by a significant margin, other traders will jump in to correct it, because they will think this is an anomaly out of which they can make money, so the stock continues to move higher and our subscribers at BullsToBears.com are very magnanimous about the situation and sell them back our stock we just bought 15% - 20% - 30% cheaper a few days/weeks ago.

These type of Market moves happens often and is not a securities violation. In fact many groups and institutions, even including but not limited to the federal government, engages in these market manipulations. What separates legal manipulations, from illegal manipulations like "spoofing the market" is the quality of the information distributed by the entities who are engaging in the manipulations. In laymen's terms: As long as the information is made readily available to the general public by the parties involved and, is truthful and accurate, there is generally nothing wrong and no red flags are raised with these trading activities.

This stock market is complicated, the future is uncertain and periods of turmoil and confusion are to be expected. There’s nothing you can do about that. Just get used to it, learn how to adjust your trades and notice the anomalies. When there is nothing but fear in the air and investor confidence is very low, stick to your convictions, a prudent investment strategy and a long-term focus will help you practice good trades and stay the course. When these times arise and you know they will, disciplined investors  like Bulls To Bears subscribers will have the opportunity to take advantage of these manipulated miscorrelated stock prices.

When you look at the market, and all you see is red stocks and scariness. Remember to look at it as your investing from a smarter perspective, imagine it as a long term buying opportunity. That is your goal. You should look at investing through nearer to longer term horizons.

Granted, short-term volatility and selloffs are tough on the nerves and psyche, especially when bad stories captivate the news and everyone's scared and panicked and running for the exits. Learn from the pros on what our years of stock trading has taught us,  that this is a better time to be a stock buyer, and not a stock seller. Just Imagine yourself having the insight and the opportunity to go back in time and buy some great stocks like Amazon, Priceline and Apple after the markets collapsed in '07-'09? If you had the wisdom and had placed some good trades then... instead of running for the exits? How different could your life be today? So, be bold and create your own future!

So, next time the media outlets and Wall Street news stations are bashing stocks and there is wild market swings and higher than normal volatility, take a breather. Think hard and smart! Because when they do this, they try to get your emotions involved. When you start acting based on fear and your emotions kick in, they win, you lose! When your emotions enter into the trade you start to make bad decisions both in and out of the stock market.

We have a  idea! Strive to be a smarter trader and experience our trading program for yourself. Learn how Bulls To Bears can help you to narrow your focus onto what we know and believe to be better trade setups. Take advantage of legal market manipulations that happen daily and learn the laws of supply and demand with our 14 FREE DAY TRIAL.

Stop spending so much time trying to figure out what stocks to trade. We’ve got that covered. Get access to our FREE TRADING NEWSLETTER and discover better tip's like this article and others on how you can reduce your downside risk.  Know when to add to good, yet cheaper, stocks in your portfolio that are down - instead of selling them and start looking into more profits for yourself.
 
We hope to see you soon!  Till next time... Happy Trading!

Bulls To Bears: How High Is High


How High Is High? Can The Bulls Charge On?
 
In doing  our due diligence for our members  we constantly explore  websites  that allow average traders to make stock predictions. Many of them try and make their own stock predictions tend to do so using technical trading tools. They prognosticate on the direction of certain equities based on triangles, trend lines, moving averages and more. What I am astounded by is how each one of them can have a different opinion from one to the next. One thinks the stock is going to tank because it looks like a descending triangle. Another thinks it is signaling a breakout to form a new high.

The interesting thing though, is when it comes to the general market. They all seem to think the Dow and other averages are too high and “done”. It seems that they all look at the general market the same way.

They analyze it like a single equity which has climbed too high based on its current earnings and value. In general, they are wrong as witnessed by the continuing new highs experienced in the market. The question is, why is this the case?


The stock market always has the potential to continue to breakout. Stock prices may go up more, as people continue to earn hearty returns. More loose money comes to the market, and prices go up  further still, attracting even more money. Rumors about the longest-running bull market in history swirl and more investors come into the market. After all how can you beat 5% GDP?
 
There are many reasons for this boom, but the main reason we believe involves sector rotation. If you look at the current investment situation, there is really no place else for the money to flow. Bonds and debt instruments are still not paying enough to be worth putting your money there. Commodities present too much risk. Real Estate once again shot up to unrealistic multiples and investors are left scratching their heads for alternatives to stocks. Currently there are no good replacements. So in their quest for diversity they seek out other areas of the market that have not done as well. They rotate money from one sector to another. But the money still stays in the stock market.
 
You see this reflect clearly in the Dow which has natural diversity built into it. Some weeks the Pharmaceuticals like Merck or Pfizer or Johnson & Johnson are running. The next week they are flat and the technology stocks like Apple, Cisco and Microsoft are running. While each sector runs, the other sectors don’t seem to sell off. This continues to drive the average forward - week after week. 
 
Business is looking better than ever with business enthusiasm at record levels. The Market continues to make new all time highs. President Trump’s focus is on long-term economic fundamentals, which has remained exceptionally strong, with strengthening U.S. economic growth, historically low unemployment, and increased wages for the average American worker. The recent tax cuts and regulatory reforms continue to strengthen the U.S. economy and continue to increase prosperity for the American people.
 
Companies have enormous profit margins right now and are they are using their excess cash to buy back its shares. This, of course, reduces shares outstanding. When companies with Billions in cash like Amazon buy back their shares, this reduces the need for the big mutual funds, etc.
 
For now Stocks continue to soar without taking a breather for a correction despite all the craziness and volatility going on in Washington, continued tension with North Korea and worries about trade Tariffs. How much longer can the market hold its nose up high and pretend that the world is a stable place? We know how hard it is for our society to loosen its grip on the concept of Ever More and to contemplate the idea of Enough. But we recommend trying it. 
 
The stock market just won’t go down, despite geopolitical concerns, over stretched valuations and an unpredictable president. Understanding why the Market keep rising is one way to judge how long the rally is going to last and what will happen next.
 
Will this upward spiral end? Of course it will! But it may take a lot longer than people think. President Trumps economic stimulus has a strong focus on manufacturing. This has not been a focus for a long time. The Dow industrials are geared to be able to take maximum advantage of this. The companies that make up the average could see a long period of solid earnings growth. How does this affect the average investor? Well as we all know, in the stock market, all ships ride high tides. If the Dow keeps going up, expect the rest of the market to follow suit. 
 
In conclusion: Don’t listen to the pundits and naysayers who say the market is overvalued and miss out on major increases in your portfolio because people say the market is “too high”. We firmly believe the greatest risk to the average investor at this time is being underinvested.

Rather than worry about whether now is the best time to buy, just keep buying. Market high or market low, just keep buying. You should think of buying investments like you buy your food. Make it a habit to invest your money like you make it a habit to pay your bills. As long as you can buy, you should continue purchasing equities. Just do it! Thank us later...

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Till next time... As always, Happy Trading!

Bulls To Bears: Time To Trade A Pot of Gold Paper

Gold is a commodity subject to the variation of supply and demand. The value of gold changes fast, and gold's price moves can be very volatile. Gold stocks also have a tendency of performing terrible when the stock market is doing well, as they are today.

Consistently, throughout the years, Gold has outperformed a variety of investments. However, surprisingly there are still millions of Americans who don’t own any gold or gold stocks. A large number of people still remain on the sidelines simply because they are confused by the vast array of gold investment options. This puzzlement is the subject that we are going to examine today in this blog.
 
It has been characterized by the methods and principles of science that it is easier for individuals to make decisions when there are only 2 or 3 possible choices. Otherwise, the assignment of assessing every conceivable decision turns out to be to daunting of a task for people,  to the point that it scares them  into inaction.

The gold market has recently seen the innovation of a large number of new products, but at the day’s end there are really only two choices  for buying gold - paper gold or physical gold.

Paper gold investments, also known as gold derivatives, are investment vehicles that have something to do with gold, but do not include the physical delivery of it to the purchaser. Examples include gold mining stocks, gold ETF investments and gold pooled accounts. The calling cards of these ventures is that they are frequently expected to closely track the gold spot price, but rarely do, and at the end of the day you still require a piece of paper to prove possession of it.

Physical gold investments are exactly what they sound like: these are purchases which include taking possession of physical gold. An Investor can purchase gold bullion bars, gold coins or certified coin investments and immediately become a part of the physical gold investment market. The bullion is always tracked by the spot price, while certified coins regularly track the spot price and in many cases beat the bullion over time.

Gold speculators who are in it looking to make a quick buck may do better with paper gold investments, but safety minded investors will usually get what they are looking for by purchasing physical gold.  It’s a simple question, if you are one of the many people as of yet who do not own any gold investments, you have two options when looking to buy Gold. It’s merely an easy question of what is most important to you, profit or safety.

Whether it is the tensions in the Middle East, Africa or elsewhere, it is becoming increasingly obvious that political and economic uncertainty is another reality of today’s economic environment. Consequently, speculators commonly take a gander at gold as a place of refuge amid times of political and monetary vulnerability. Why is this? Well, history is full of collapsing empires, political coups, and the collapse of currencies. During such times, investors who held gold were able to successfully protect their wealth and, in some cases, even use the commodities to escape the turmoil. Thus, there are situations that indicate some sort of worldwide financial vulnerability, speculators will frequently run to purchase gold as a place of refuge.

The fact that gold is no longer backed by the U.S. dollar (or any worldwide currency), why is Gold still important to invest in today? The more straightforward answer is that while gold is no longer in the forefront of the global economy, it is still extremely critical to own. To further illustrate this point, there is no other compelling reason to look any further than the accounting reports of national banks and other money related institutions. Presently, these institutions are in charge of holding around one-fifth of the world's supply of above the ground gold. Further still, many national banks have been adding to their ever present gold stockpiles, telling tales of their concerns about the long haul of the worldwide economy.

The idea that gold preserves wealth is even more important in an economic environment where investors are faced with a declining U.S. dollar and rising inflation. Historically speaking, gold has served as a hedge against both of these situations. With rising inflation, gold typically advances. When investors realize that their money is losing value, they will start positioning their investments into hard asset that haves traditionally maintained its value. The 1970s presented a prime example of rising gold prices in the midst of rising inflation.

The reason gold benefits from the declining U.S. dollar, is because gold is priced in U.S. dollars on a global scale. There are two explanations behind this relationship.  First, speculators who are thinking of purchasing gold (i.e., national banks) must tender  it in U.S. dollars to make the exchange. This eventually drives the U.S. dollar lower as worldwide financial banks try to differentiate out of the dollar. The second reason is the way that a struggling dollar makes gold less expensive for speculators who hold different forms. These outcomes are a more of a noteworthy request from institutions that hold gold forms in retrospect to the U.S. dollar.

When you pair assets that move differently from each other, you tend to create a more diversified portfolio. This is why mixing bonds with stocks is the cornerstone of so many portfolios. Bonds have a negative correlation with stocks, meaning they tend to go up when stocks are going down, and vice versa. Here's the interesting thing: Gold's correlation with bonds over the past decade or so is roughly 0.25, still very low. So gold doesn't track along with stocks, and it doesn't track along with bonds, either. Adding a small amount of gold to a stock and bond portfolio, probably no more than 10%, can help increase diversification and the ultimate safety of your entire portfolio.

Should you be investing in Gold at this time? Being the contrarians that we are and looking at the current prices of gold stocks across the board. Some gold stocks appear to be looming buys. In the case of gold, it is a risky asset class and it would be unwise to invest all your money in it. However, because gold is viewed as a source of wealth, you shouldn't dismiss it as an investment option.

Investors tend to gravitate into gold when they are scared, which boosts its value when assets such as stocks start falling. It just needs to be paired with a more broadly diversified portfolio so you can benefit from the non-correlated nature of gold's performance. And, yes, that will require re-balancing your portfolio every so often, when allocations get materially out of line.

We at BullsToBears.com aren't in the business of buying physical gold, but we can point you in the direction of some gold stocks that appear attractive and might be worth dabbling in at this time and place. As always, were here to help you become a better trader by pointing you in the direction of a some great trades ahead.

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