Stock Market Following and Stock Trading Tips

 The Secret of Making Money in the Stock Market

Practical Example: In this practical example we  are to analyse  the NASDAQ Composite for a period of ten months.

1.The Longer Trend.  Here we consider the ever changing properties of this security - from trending markets to ranging markets. We then fit the Variable Equilibrium Line and there we have two see-saws. One see-saw is for uptrend (Chart 1 Uptrend) and the other for downtrend (Chart 2 Downtrend).

Chart 1 Longer Uptrend shows a white-red line which is the Variable Equilibrium Line and the green-lime line is price line. In as long as the price line remains above the Variable Equilibrium Line, the longer trend is uptrend. When the Variable Equilibrium Line is violated, we move to Chart 2 Downtrend.

Chart 2 Longer Downtrend shows a white-red line which is the Variable Equilibrium Line and the green-lime line is price line. In as long as the price line remains below the Variable Equilibrium Line, the longer trend is downtrend. When the Variable Equilibrium Line is violated at B, we move to Chart 1 Uptrend.

(Click to Enlarge the Chart in New Window)

Chart 3 Troughs shows a light blue lines which is the High Probability zone, the white line is the Price Standard Deviation Line and the red line is a visualization of possible troughs. When the Price Standard Deviation Line has violated the High Probability zone, it's time to strike (to open new positions if we want to be long or to close positions if we've been short). We strike the following day based on the lowest low of the current trough.  If the Longer trend is downtrend, when you close the short positions, retain neutral positions that will benefit from a possible extension of exhaustion lower prices and time decay. You however should be fully covered not just by Delta but by one to one short and long.

(Click to Enlarge the Chart in New Window)

Chart 4 Crests shows a light blue lines which is the High Probability zone, the white line is the Price Standard Deviation Line and the red line is a visualization of possible Crests. When the Price Standard Deviation Line has violated the High Probability zone, it's time to strike (to open new positions if we want to be short a stock or to close positions if we've been long a stock). We strike the following day based on the highest high of the current crest. If the Longer trend is uptrend, when you close the long positions, retain neutral positions that will benefit from possible extension of exhaustion higher prices and time decay. You however should be fully covered not just by Delta but one to one.

Chart 5 Intermediate Uptrend shows a green-lime line which is the price line and the red-white line is the intermediate trend variable equilibrium line. This chart is not always used. When used it is interpreted just as in Chart 1 Longer Uptrend above. It shows where reasonably good intermediate range crests have ended. In an uptrend, the stop loss is based on the lowest low of the previous trough. If you are stopped you are essentially saying there is a breakout to the downside. That breakout is only valid only if the price line has penetrated the red-white line which is the intermediate trend variable equilibrium line in Chart 5 (point 1). This breakout in the downside should be traded regardless of what Chart 1 Longer Uptrend indicate. However, if Chart 1 Longer Uptrend does not confirm this but instead the price line in intermediate trend variable equilibrium line in Chart 6 (point 2) penetrate the red-white line, the breakout is a failure and the trades should be closed and new trades in the upside established. You however need be aware that these positions are being established in the middle of the forming crest. A new stop loss has to be found.

Chart 6 Intermediate Downtrend shows a green-lime line which is the price line and the red-white line is the intermediate trend variable equilibrium line. This chart is not always used. When used it is interpreted just as in Chart 2 Longer Downtrend above. It shows where reasonably good intermediate range troughs have ended. In a downtrend, the stop loss is based on the highest high of the previous crest. If you are stopped you are essentially saying there is a breakout to the upside. That breakout is only valid only if the price line has penetrated the red-white line which is the intermediate trend variable equilibrium line in Chart 6. This breakout in the upside should be traded regardless of what Chart 2 Longer Downtrend indicate. However, if Chart 2 Longer Downtrend does not confirm this but instead the price line in intermediate trend variable equilibrium line in Chart 5 penetrate the red-white line which is the intermediate trend variable equilibrium line, then the breakout is a failure and the trades should be closed and new trades in the downside established. You however need be aware that these positions are being established in the middle of the forming trough. A new stop loss has to be found.

The Trades: We are to look at Nasdaq Composite Index ($COMPQ). But first let mention that Nasdaq 100 Components ($NDX) are the top 100 stocks of  the Nasdaq Composite Index. Nasdaq 100 Components will mirror almost one to one the analysis of Nasdaq Composite. It is by this relationship that we analyse the Nasdaq Composite Index and remotely trade the 100 stocks. These 100 stocks are strong, have options and are heavily traded - meaning they can be manipulated for a few minutes or hours and we do not want that. There are also Exchange Traded Fund (ETFs) like QQQQ which also mirror on Nasdaq Composite Index and has a very heavy volume. By the same logic we analyse Dow Jones Composite Index and trade it's 30 components of stocks. Similarly we analyses the SP500 Index and trade it's components of 500 stocks.

We now look at profitable trades on Nasdaq Composite Index from August 23rd 2006 to June 22nd 2007. You will notice from the  charts that the price of Nasdaq Composite Index has been divided by 100 for simplicity so that we deal with only a few digits; -  it makes no difference in the analysis. We could as well have used QQQQ. We suggest you would have to use stocks with a price greater than $5 and they should have options and a high trading volume.

1. August 23rd 2006, Chart 3 troughs, point 1,  the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 21.2675 and this is a very critical value in our trading. The longer trend, Chart 1 Uptrend was uptrend as the price line was above the Variable Equilibrium Line. The highest high of the current ending crest was higher than the highest high of the previous crest. Now our low of 21.2675 was the price of the market and a measure of real time news, economic growth reports, manipulation, fear and greed. In view of these, it's time to strike, and we have to buy at a price of 21.2675 or lower. The next day a low of 21.2265 was achieved and we were easily filled between been 21.2675 and 21.2265. You can watch the market until your price is achieved so you can pull the trigger, you can place a limit order with your conditions, or you can as well place a discretionary order with your broker. The lowest low in the previous trough was 20.4822. This low less an error correction of 0.5% equals 20.3798 is set as the stop loss. Should the price drop below 20.3798, then our open positions are automatically sold at a loss and we have to accept it.

Having placed the order and stop loss is in place, we now have to wait and see how things will unfold. On August 30th 2006, Chart 4 Crests, point 1, the Price Standard Deviation Line entered the High Probability zone in the upside. The high for that day was 21.8855 and this is a very critical value in our trading. We are now in profit. and we have to sell at a price of 21.8855 or higher. The next day a high of 21.9334 was achieved and we easily sold to close at between 21.8855 and 21.9334. Once you have seen the signal you should not postpone taking the action. Since we are an uptrend, what follows here are tired higher highs in an exhausted crest. It can take a considerable length of time for you to get another opportunity to trade again in the upside. Rather than closing your long positions completely, take advantage and establish bullish neutral positions that will benefit from decay of time. We shall be discussing this neutral trading latter.

2.September 7th 2006. Chart 3 troughs, point 2,  the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 21.4936 and this is a very critical value in our trading. The longer trend, Chart 1 Uptrend was uptrend as the price line was above the Variable Equilibrium Line. The highest high of the current ending crest was higher than the highest high of the previous crest. Armed with our low of 21.4936, we now wait for this low to be broken so that we get filled. Nothing doing. The low for this day is 21.5455 which is higher than the low of previous day. Towards the last hour of trading that day you could clearly see that low will not be broken. Decisions has to be made and very fast. Either we buy at the closing price which was 21.6579 and sacrifice some of the profits or wait to see if this low will be broken the next day and risk missing an entry price if the prices continued moving higher. The solution is you establish half of your positions using a price very close to the closing price and the other half you gamble with it hoping that your low will be broken the next day. As you can see, the market went ahead to register a new low of 21.4744. We there bought the other half of our positions at between 21.5455 and 21.4744. The stop loss orders was the lowest low of the previous trough at 21.2265 less 0.5% correction error.

We now have our position in two halves and the stop loss is in place. We now have to wait and see how things unfold. On September 12th 2006, Chart 4 Crests, point 2, the Price Standard Deviation Line entered the High Probability zone in the upside. The high for that day was 22.1728 and this is a very critical value in our trading. We are now in profit. and we have to sell at a price of 22.1728 or higher. The next day a high of 22.2918 was achieved and we easily sold to close at between 22.1728 and 22.2918. Since the uptrend is still intact we also set neutral positions that are biased to the upside and rich in time decay in our favour.

3. September 19th 2006. Chart 3 troughs, three days before point 3, the Price Standard Deviation Line entered the High Probability zone in the downside but Chart 3 crests fails to support it. We wait. September 22nd 2006, Chart 3 troughs,  point 3, the Price Standard Deviation Line again entered the High Probability zone in the downside. The low for that day was 22.1013 and this is a very critical value in our trading. The longer trend, Chart 1 Uptrend was uptrend as the price line was above the Variable Equilibrium Line. The highest high of the current ending crest was higher than the highest high of the previous crest. Armed with our low of 22.1013, we now wait for this low be broken so that we get filled. The next day, nothing doing as our low was not broken. That day the low was 22.1202 and the close was 22.4907. We establish half of our positions nearer the close of the day and the stop loss was set at the low 22.0293 less 0.5% error and this low was set on September 19th 2006.

On September 26th 2006, Chart 4 Crests, point 3, the Price Standard Deviation Line entered the High Probability zone in the upside. The high for that day was 22.6178 and this is a very critical value in our trading. Since this position was established at high price -  the closing price of 22.4907, the profit margin was not much. But we had to get out anyway. With our high of 22.6178, we waited for the next day. The next day we had a high of 22.7100, and got out between 22.6178 and 22.7100. Again neutral positions were established and stop loss was set accordingly.

4. October 2nd 2006. Chart 3 troughs, point 4,  the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 22.3568 and this is a very critical value in our trading. The longer trend, Chart 1 Uptrend is still uptrend as the price line is above the Variable Equilibrium Line. The highest high of the current ending crest was higher than the highest high of the previous crest. The next day and armed with our low of 22.3568, we now wait for this low to be broken so that we get filled. The next day a low of 22.2421 is achieved and the order is easily filled at between 22.3568 and 22.2421. The stop order is set at the lowest low of previous trough 22.1013 less error allowance.

On October 4th 2006, Chart 4 Crests, point 4, the Price Standard Deviation Line entered the High Probability zone in the upside. The high for that day was 22.9098 and again this is a very critical value in our trading. It's time to get out anyway. With our high of 22.9098, we waited for the next day. The next day we had a high of 23.0635, and we sell to close at between 22.9098 and 23.0635. Again neutral positions are established and stop loss set accordingly.

5. The market took a long period of over two weeks to generate a buy signal. On October 19th 2006, Chart 3 troughs, point 5,  the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 23.2443  and this is a very critical value in our trading. The longer trend, Chart 1 Uptrend is still uptrend as the price line is above the Variable Equilibrium Line. The highest high of the current ending crest was higher than the highest high of the previous crest. The next day and armed with our low of 23.2443, we wait for this low be broken so that we get filled. Nothing done. The low for that day was 23.2913 and the close was 23.4230. We quietly place a half of our order close to the close. The remaining half we have to wait for next day. Our stop order is set in place too. The next day we get a low of 23.3061 and the market is moving higher - so the remaining half does not get filled.

On October 26th 2006, Chart 4 Crests, point 5, the Price Standard Deviation Line entered the High Probability zone in the upside. The high for that day was 23.7929 and again this is a very critical value in our trading. It's time to get out anyway. With our high of 23.7929, we waited for the next day. The next day we had a high of 23.7734  and a close of 23.5062, and we failed to sell to close at 23.7929 or higher. We continued to wait for a price of 23.7929 or higher. The stop loss is set accordingly at 23.2443 less 0.5% error adjustment equals 23.1281.

6. November 1st 2006, Chart 3 troughs, point 6,  the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 23.3057 and this is a very critical value in our trading. However, we are still holding half of our positions which were never filled on the upside. Our stop loss of 23.1281 still hold. The longer trend, Chart 1 Uptrend is still uptrend as the price line is above the Variable Equilibrium Line. And still on a plus to our opinion, the highest high of the current ending crest was higher than the highest high of the previous crest. With our low of 23.3057, we arm ourselves to face the market the next day. We wait for this low to be broken so that we get filled. A low of 23.2084 is immediately registered and we get filled at between 23.3057 and 23.2084.  The next day a lower low of 23.1682 is registered which made things look very gloomy that day, first because this low was lower than the low of the previous of 23.2443. The stop loss of 23.1281 had not been penetrated and we expected that to happen any minute and get out at a loss. However the market went on to close at 23.3079. Had we been stopped and the upward trend remained, then we would have gone to Chart 6 Downtrend to look for an entry to the upside. More on this latter.

The next day, November 6th 2006, an encouraging low of 23.4166 was recorded, and at the same time, the Price Standard Deviation Line entered the High Probability zone in the upside as per Chart 3 Crests, point 6. The high price that day was 23.7181 and this was to form the basis of our exit price. The next day, November 7th 2006, the market was spectacular hitting a high of  23.9134, and we got out at between 23.7181 and 23.9134. As usual we still went further and set neutral positions that were biased on the upside as the market continued being bullish. Since this market was an uptrend the stop loss of 23.1281 had to remain as we only adjust a stop loss upward in an uptrend, and downward only in a downtrend.

7. As we continued to hold our neutral positions, on November 27th 2006, Chart 3 troughs, point 7,  the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 24.0589 and this as usual is a very critical value in our trading. The longer trend, Chart 1 Uptrend is still uptrend as the price line is above the Variable Equilibrium Line. The highest high of the current ending crest was higher than the highest high of the previous crest. The next day and armed with our low of 24.0589, we venture into the market and wait for this low be broken so that we can pull the trigger. A low of 23.9010 is achieved and a full order is easily filled at between 24.0589 and 23.9010. The stop order is set at the horizontal equivalent of the Variable Equilibrium Line, Chart 1 Uptrend and not the lowest low of previous trough  less error allowance. This is because the Variable Equilibrium Line was getting closer to the price line than the lowest low of previous trough. The closer the Variable Equilibrium Line gets to  the price line, the stop loss is adjusted accordingly at a small additional fee you pay your broker.

On December 4th 2006, Chart 4 Crests, point 7, the Price Standard Deviation Line entered the High Probability zone in the upside. The high for that day was 24.5567 and again this is a very critical value in our trading. It's time to get out anyway. With our high of 24.5567, we waited for the next day. The next day we had a high of 24.5951, and we sold to close at between 24.5951 and 24.5567. By selling to open a few short positions and adding them to our winning trade, we established neutral positions thus saving on transaction commissions and ask/bid slippages. And talking of ask/bid slippages, this can be a lot of your money especially in options trades. Take care. Stop loss orders were then set accordingly.

8. On December 19th 2006, Chart 3 troughs, point 8,  the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 24.0885 and this as usual is a very critical value in our trading. The longer trend, Chart 1 Uptrend is still uptrend as the price line is above the Variable Equilibrium Line. The highest high of the current ending crest was higher than the highest high of the previous crest. The next day and armed with our low of 24.0885, we ventured into the market and wait for this low be broken so that we can open buy positions. All day nothing  doing. The low for that day was 24.2641 and the close was 24.2761. So towards the end of trading and after realizing our low was unlikely to be broken, we bought to open half our positions rest we risk missing on the 'upcoming' upswing. The remaining half of our positions was reserved just incase our low was to be broken, otherwise we forfeit trading that half of our positions. The next day a low of 24.0899 is registered just a few point shy of our low of 24.0885. So, nothing done. The next day a low of 24.0072 is recorded and we comfortably got filled at between 24.0885 and 24.0072. The stop loss is placed at the previous trough's lowest low of 23.9010 less correction error of 0.5%.The following a low of 23.9768 is registered and this made our moods very gloomy as it had come very close to our stop. We kept on praying and hoping that our stop loss won't have a job to do. And it worked in our favour, at least for the time being. On January 3rd 2007, the low came even closer at 23.9466 but thereafter the market moved upward.

Still on the very same day, January 3rd 2007, that the market was registering the lowest low of 23.9466, the bulls were busy riding high as the Price Standard Deviation Line entered the High Probability zone in the upside - Chart 3 crests, point 8. The high for that day was 24.5462 and this as usual is a very critical value in our trading. Hopefully we are to get out at a profit the next day. Next day, January 4th 2006, a high of 24.6051 is achieved and we get out at between 24.5462 and 24.6051. As usual we converted most of our positions to neutral positions biased to the upside and covered one to one.

9. On January 18th 2007, Chart 3 troughs, point 9,  the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 24.3811 and this as usual is a very critical value in our trading. The longer trend, Chart 1 Uptrend is still uptrend as the price line is above the Variable Equilibrium Line. The highest high of the current ending crest was higher than the highest high of the previous crest. The next day and armed with our low of 24.3811, we get into the market and wait for this low be broken so that we can open buy positions. And yes, the full order is easily filled at between that day's low of 24.3568 and the previous day's low 24.3811. The next day we look forward for better things but got a lower low of 24.2292. The stop loss is firmly placed at 23.9466 less 0.5% error equals 23.8269. The market moved somehow higher but on January 26th 2007, the market hit a low of 24.1861.

On January 31st 2007, Chart 4 Crests, point 9, the Price Standard Deviation Line entered the High Probability zone in the upside. The high for that day was 24.7120 and again this is a very critical value in our trading. It's time to get out anyway. With our high of 24.7120, we waited for the next day. The next day we had a high of 24.8138, and with our heads high, we sold to close at between 24.7120 and 24.8138.

10. On February 9th, 2007, Chart 3 troughs, point 10,  the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 24.5344 and this as usual is a very critical value in our trading. The longer trend, Chart 1 Uptrend is still uptrend as the price line is above the Variable Equilibrium Line. This Variable Equilibrium Line is getting very close to stop loss as well as the price line. The highest high of the current ending crest was lower than the highest high of the previous crest, which is a sign of weakness. In as long as the Longer Trend remained uptrend and we've not been proved otherwise, we had to venture. The next day and armed with our low of 24.5344, we get into the market and wait for this low be broken so that we can open buy positions. The next day get a low of 24.4468, and all our orders are filled at between 24.5344 and 24.4468. The stop loss orders are placed based on 24.1861 less 0.5% equals 24.0652.

On February 14th 2007, Chart 4 Crests, point 10, the Price Standard Deviation Line entered the High Probability zone in the upside. The high for that day was 24.9451 and again this is a very critical value in our trading. It's time to get out anyway. With our high of 24.9451, we waited for the next day. The next day we had a high of 24.9837, and with full happiness, we sold to close at between 24.9451 and 24.9837.   As usual we set neutral positions biased to the upside and well covered.

11. On February 26th, 2007, Chart 3 troughs, point 11,  the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 24.9254 and this as usual is a very critical value in our trading. The longer trend, Chart 1 Uptrend is still uptrend as the price line is above the Variable Equilibrium Line. The highest high of the current ending crest was higher than the highest high of the previous crest. The next day, we got a high of 24.7092 and a low of 24.0236. Our stop loss was set at 24.4468 less 0.5% error equals 24.3246. All our orders got filled at below 24.7092. No sooner had our orders been filled, than the market started to descended with a lot of steams. Latter in the day, our stop loss orders were penetrated and the broker had his field day as we exited with a 'small' loss before the market could register the day's low of 24.0236.

On this day, February 27th, 2007, Chart 1 Uptrend, point A, the longer trend, the price line violated the Variable Equilibrium Line and the longer trend was therefore downtrend. Had this Variable Equilibrium Line not been penetrated then we would have used Chart 6 Downtrend to find an entry in the upside.

12. On March 8th 2007, Chart 4 Crests, point 11,  the Price Standard Deviation Line entered the High Probability zone in the upside. The high for that day was 24.0220 and this as usual is a very critical value in our trading. The longer trend, Chart 2 Downtrend is still downtrend as the price line is below the Variable Equilibrium Line. The lowest low of the current ending trough was far much lower than the lowest low of the previous trough. The next day, we got a high of 24.0480 and our positions to the downside were easily filled at between 24.0480 and 24.0220. The highest high in the previous crest to set our stop loss was very far at 25.3142 which was set on February 22nd 2007. However, the Variable Equilibrium Line, Chart 2 Downtrend, had come closer. This Variable Equilibrium Line had to be used because it was closer and were it to be penetrated by price line then the trend would change to upside. So the corresponding price to this Variable Equilibrium Line
at 24.7596 was used as stop loss, and this had to be adjusted accordingly as it came closer with time to price line.

On March 14th 2007, Chart 3 Troughs, before point 13, the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 23.3157 and again this is a very critical value in our trading. It's time to get out anyway. With our low of 23.3157, we waited for the next day. The next day, nothing done.  A high of 23.8262 and a low of 23.6774 were recorded. In the meantime, the stop loss had been adjusted to 24.5091. The days that followed the price continued to go higher and we were sadly stopped by our stop loss at 24.4881with a 'small' loss. The market penetrated the Variable Equilibrium Line, Chart 2 Downtrend, point B, and as such it became uptrend.

13. On this day, March 28th 2007, Chart 3 troughs, point 13,  the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 24.1309 and this as usual is a very critical value in our trading. The longer trend, Chart 1 Uptrend has again become uptrend as the price line is above the Variable Equilibrium Line. The highest high of the current ending crest was higher than the highest high of the previous crest that had failed to identify as a significant crest. The next day and  with our low of 24.1309, we ventured into the market and wait for this low to be broken so that we can open buy positions. A low of 23.9683 is reached and we easily get filled at between 24.1309 and 23.9683. We set the stop loss orders based on the March 14 2007 low of 23.3157. This low was far down and the risks were high.

On April 9th 2007, Chart 4 Crests, point 13, the Price Standard Deviation Line entered the High Probability zone in the upside. The high for that day was 24.7868 and again this is a very critical value in our trading. It's time to get out anyway. With our high of 24.7868, we waited for the next day. The next day we had a high of 24.7946, and with our heads high, we sold to close at between 24.7946 and 24.7868. We then established neutral positions biased in the upside.

14. April 30th 2007, Chart 3 troughs, point 14,  the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 25.2509  and this as usual is a very critical value in our trading. The longer trend, Chart 1 Uptrend is still uptrend as the price line is above the Variable Equilibrium Line. The highest high of the current ending crest was higher than the highest high of the previous crest. The next day and with a low of 25.2509, we set entry orders at below this low of 25.2509.  The low for this day is 25.1057 and we get filled at between 25.2509 and 25.1057. The stop loss orders are set based on low of previous trough at 23.9683 less 0.5% equals 23.8485.

On May 2nd 2007, Chart 4 Crests, point 14, the Price Standard Deviation Line entered the High Probability zone in the upside. The high for that day was 25.6278 and again this is a very critical value in our trading. It's time to get out. With our high of 25.6278, we waited for the next day. The next day we had a high of 25.6980, and with our heads high, we sold to close at between 25.6278 and 25.6980. We then established neutral positions biased to the upside.

15. On 10th May 2007, Chart 3 troughs, point 15,  the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 25.3312 and this as usual is a very critical value in our trading. The longer trend, Chart 1 Uptrend is still uptrend as the price line is above the Variable Equilibrium Line. The highest high of the current ending crest was higher than the highest high of the previous crest. The next day and with a low of 25.3312, we set entry orders at below this low of 25.3312.  All day nothing doing. The low for this day is 25.3967 and towards the close of the market, half of our positions are set to be filled near the closing price of 25.6222. The remaining wll have to wait for the next days just incase we get a lower low than 25.3312. On May 15th 2007 we get a low of 25.2383 and the half of our orders that had remained is filled at between 25.3312 and 25.2383. The stop loss is set based on low of previous trough at 25.1057 less 0.5% equals 24.9802.

On May 21st 2007, Chart 4 Crests, point 15, the Price Standard Deviation Line entered the High Probability zone in the upside. The high for that day was 25.8787 and again this is a very critical value in our trading. It's time to get out. We know what we want. If the market was to hit this high of 25.8787 the next day, then we strike like a rattle snake. The next day the marker registered a high of 25.9303 and we comfortably exited at between 25.8787 and 25.9303. Then we set neutral positions biased to the upside.

16. On 24th May 2007, Chart 3 troughs, point 16,  the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 25.3128 and this as usual is a very critical value in our trading. The longer trend, Chart 1 Uptrend is still uptrend as the price line is above the Variable Equilibrium Line. The highest high of the current ending crest was higher than the highest high of the previous crest. With this low of 25.3128, we wait for the next trading day. Nothing doing. This day we had a low of 25.4446 and a close of 25.5719. So we establish half positions nearer the closing price. Stop loss orders are equally put in position accordingly. No lower low was again registered for this trough.

On May 30th 2007, Chart 4 Crests, point 16, the Price Standard Deviation Line entered the High Probability zone in the upside. The high for that day was 25.9259 and again this is a very critical value in our trading. It's time to get out. We know what we want. If the market was to hit this high of 25.9259 the next day, then we are to monitor it from there tick by tick that it will not move below that high when our positions are open. You can also give conditional instructions to your broker. The next day the marker registered a high of 26.0790 and closed positions at between 25.9259 and 26.0790. 25.9303 and we comfortably exited at between 25.8787 and 25.9303. Then we set neutral positions biased to the upside and stop loss orders set accordingly.

17. June 6th 2007, Chart 3 troughs, point 17,  the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 25.7881 and this is a very critical value in our trading. The longer trend, Chart 1 Uptrend is still uptrend as the price line is above the Variable Equilibrium Line. And still on a plus to our opinion, the highest high of the current ending crest was higher than the highest high of the previous crest. With our low of 25.7881, we arm ourselves to face the market the next day. We wait for this low be broken so that we get filled. A low of 25.4138 is immediately registered and we get filled at between 25.7881 and 25.4138. The next day a lower low of 25.3497 is registered. The stop loss orders are set at 25.3128 less 0.5% equals 25.1862

June 14th 2007, Chart 4 Crests, point 17, the Price Standard Deviation Line entered the High Probability zone in the upside. The high for that day was 26.0476 and again this is a very critical value in our trading. It's time to get out. We know what we want. If the market was to hit this high of 26.0476 the next day, then from there we shall follow it tick by tick so that we can get out at a price above 26.0476. This day a high of 26.3051 is registered and we get out at between 26.3051 and 26.0476. Then we set neutral positions biased to the upside and stop loss orders set accordingly.

18. June 22nd 2007. Chart 3 troughs, point 18,  the Price Standard Deviation Line entered the High Probability zone in the downside. The low for that day was 25.8324 and this is a very critical value in our trading. The longer trend, Chart 1 Uptrend was uptrend as the price line was above the Variable Equilibrium Line. The highest high of the current ending crest was higher than the highest high of the previous crest. Armed with our low of 25.8324, we now wait for this low to be broken so that we get filled. The next day  we get a low of 25.6850 and get filled at between 25.8324 and 25.6850. The stop loss orders was set at 25.3497 less 0.5% equals 25.2230.

Always make sure that every position that you open has a corresponding stop loss order, repeat, every position that you open has a corresponding stop loss order. We can repeat this until breakfast tomorrow. Trading without stop loss orders is like driving an automobile with faulty breaking system. Every now and then check to see if your stop loss orders are still active. If your broker's system fails, when it come back it may come without your stop loss orders and that is why you should keep checking on your open positions and your stops. And these stops are not free. There is a small fee to pay your broker and it only fair that he should get it.

The secret to trading is to wait for the market to talk before trading and continue to listen in case it changes its mind. You cannot impose your will on the market. The market will always tell you what it is doing. So what happened next? We got out with a profit at between 26.2656 and 26.2460.

And if you will, we can be sending to you FREE, analysis of Nasdaq Composite Index as we trade it's 100 stocks, ETFs and Options. In addition, we will also send to you analysis on Dow Jones Composite Index and SP500 Index for you to have. Every time we get the critical high or low that are prerequisite for initiating or exiting a position, we will dispatch the analysis to you. You will get this in your inbox several hours before the market open the next day. Just provide your name and email address in the box below and you can also check Where The Market is Today here.

Your Stock Broker: Get yourself a good stock broker who has low commission fees because you will be making many trades per month. A broker who charges more than $1.0 per 100 shares of stock is expensive. Likewise, A broker who charges more than $1.0 per contact (options) is expensive. A good broker should at this age have modern technology and may even include the capability for you to trade on your cell phone/pda when you are located anywhere on this planet. Search and you will find that there are many brokers who meet these criteria.

 The Secret Market: You may have wondered why some people seem to know the secret of making money in the stock market. Their secret relies on low cost high yielding stock options that are readily available and can be bought with pennies. And yes, I mean those stock options that will fluctuate at lightening speeds like propane and naked flame. Everybody seems to fear options, and with a good reason. The Mathematics involved in the dynamics of options is advanced Mathematics and that coupled with the Market Timing of the underlying stock makes it a mystery for everyone to tell you to keep off options. And yes, if you try to play a game you do not understand, then it will not take you long before you become the hunted and you will lose very fast.

Getting an accurate Market Timing is a very difficulty thing regardless of what you may have been made to believe. To neutralize the effects of inaccurate Market Timing is the so called neutral options trades biased in favour of what you think is the trend of the underlying stock. Contrary to the belief that determining the security's trend is easy, in real time this is very difficulty. That being the case, it would be fair if I mention a few things you need to know about options for you to trade neutral trades. There is a way to go about trading options that will eliminate all those fears. I am going to start by assuming that you have the basics of options and that you know what stock options are, and the details of puts and calls, strike-prices and expiration dates, in-the-money, at-the-money, out-of-the-money, short and long positions. If you do not have the basics, read Options as a Strategic Investment.

To beat inaccurate Stock Market Timing, the secret to this neutral options game plan is to use other people's money in that the options you sell pays for the better part of what you buy, with your money paying just for the difference or the gap. If you do this, it will not take long before you realize that you are ahead of the game. Unfortunately many of us place a lot of weight on trying to predict the difficulty Stock Market Timing and hardly use this strategy.

This style of options trading is a sedative strategy and you should not expect your money to multiply rampantly overnight but rather slow and consistence profits throughout the year – its waiting is like watching water in a cup dry. A 35% profit within a period of two to three weeks is normal but bigger gains in less time are not unusual. So, what Happens? The sold options and the bought options are confined in a channel such that the sold options decays or lose value faster than the bought options and the spread between their prices widen with time. When the situations warrant the appropriate adjustments and or rollovers are made to ensure all options are within the profit-yielding channel without reversing their roles.

90 percent of all options expire worthless. Time for logic: Does this mean that 90 percent of all those buying options lose their monies and that 90 percent of those who sell options make money from those options? Do not try any of these because either way you will most likely lose your money. But combine both and you see the difference. It's no wonder covered call writing is so popular. If you think the market is going up you can do the following: (a) buy long stock and sell a call, (b) buy deep in-the-money call/leap and sell at-the-money call, or (c) buy long stock. If you think the market is going down you can do the following: (a) short the stock and sell a put, (b) buy deep in-the-money put/leap and sell at-the-money put, or (c) short the stock. You will have to consider the issue of margin or collateral where applicable. These really are neutral positions but still the issue of combined delta, wear, volatility, price direction and so forth and so on has to be well understood.

Facts about Neutral Positions: Why is it then that Neutral Positions have high chances of making a profit? Two factors come into play here. (a) The short options nearer the expiration month wear or decay faster in time value in favor of the options writer and against the options buyer. (b) The stocks spend a lot of time fluctuating in neutral sideway ranges and during which options issued against them are losing time value. By twisting call and put options in certain ways, we can reduce the money we put at risk and still stand good chances of making nice profits.

Options are highly affected by implied volatility. The implied volatility is the monster that has to be contained at all cost. This implied volatility measures the cheapness and expensiveness of options premiums. Its impact to an option price is indeed very significant and cannot be ignored. Fortunately, the mere fact that you are buying an option and simultaneously selling another one tends to cancel this effect.                          

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And should you have a question you need to ask, feel free to ask for you will be answered. It is through asking that we have been able to have what we have. We provide this information free to help beginners and average traders who might be inexperienced in the complexity of stock market movements make money in the stock market.  We provide analysis of Nasdaq Composite Index, SP500, Dow, Russell 3000 and NYSE as we trade them. In addition, we can also upon request provide analysis on Exchange Traded Funds of Nasdaq, SP500, Dow, Russell 3000 and NYSE. We prefer trading Exchange Traded Funds because they spread risks across other stocks, pay dividends, are less noisy, not very prone to rumors and or manipulations, their Options are spread at workable intervals for spread strategies, and above all, ETFs trades are easily predictable by using the broad market indices of Nasdaq, SP500, Dow, Russell 3000 and NYSE.