RPM's Trader Tutorial

[RPM]

The Story: Well, ladies and gents; in case you haven't noticed, I have had to slow down my trading lately (possibly somehow realted to my 161 trades in the first 13 trading days in November). I have been flagged in one of my accounts and I have focused more on safe plays, bouncers, trending stocks, and overnight holds/gappers. Due to my perfectionist tendancies, I now have to adapt (by trading FOREX as well) in the market in order to continue or exceed previous levels of profitability. Here is what I am facing.

The Situation: I do not have 25k.......and I will not put 25k into the market before I own a home, but I want to continue to profit consistently. I would however manage anyone else's account, who has 25k......for a percentage . Aside from that though, I need to be able to pick plays which can be held overnight and will avoid the 3 x 5 rule (the enemy of most beginner-mid level traders (like myself).

The Strategy: In this thread, I will walk through my trading strategy and process for finding plays. How to create a watchlist, use alerts; find entries and exits, ect.

The Success: We will see how this works out. Watch for it!!



Please do not post feedback on this thread. I want to keep it as clean as possible. There is a separate feedback thread in this forum and the main forum.

If you don't understand the terminology used: www.investopedia.com

[RPM]

Chapter 1: The Basics

The market seems to elude most of the general public due to the Unavoidable Fact that most traders who attempt to reach profitability - inevitably fail. I blame this on 3 Main Faults in the Newbie Trader.

1) Young, egotistic college hotshots think that they are invincible and that it is IMPOSSIBLE to lose $1,000 in 30 minutes (it happens). Then they loose their parents' money and have to ask for more - vowing not to trade again.

2) These same egotistical traders think that they only need to skim over DD, charts, and TA. Meanwhile the market is complex; multi fasceted, and sometimes utterly confusing/baffeling to even the most experienced traders. And when they do not understand it - then Newbies do not enjoy it, because they feel inadequate. This leads people to stray and leave accounts inactive.

3) Then, Type B personalities over-contemplate every decision. They search and seek the market; analyzing, speculating, and proposing what could happen. They pour countless hours of time and energy into preparing to trade. They are over-cautious when they trade, and average 100-200 dollars a week ( a VERY respectable GAIN) and feel left out of the Multi-Baggers on the message boards. Another couple of Months go by, and they think that the market isn't for them, and can never turn a profit that will provide an income. Although they leave with an extensive knowledge of TA, Fundamental, and L2 analysis. (a true shame).

All 3 of these traders EXITED the MARKET and added to the statistic of "failed daytraders."

It is a shame, but if you are reading this, then you are willing to learn. Yet, think of it this way.

NO MATTER HOW MUCH YOU LOSE:

1) 12 Month Subscription to Alphatrade: $500.00

2) 12 Month Subsciption to Microcaptrade: $1200.00

3) Lossses Incurred in 1st Year ROOKIE MISTAKES: $5,000 - $10,000

4) AVOIDING 8 YEARS of MEDICAL SCHOOLING and $125,000 in tuition for a 6 FIGURE INCOME and working at home = PRICELESS

SO LET's GET STARTED !!!

[RPM]

There are 3 things that matter in the Small Cap/Penny Market.

1) Fundamentals: P/E Ratio, Earnings, ect. - none of those fundamentals matter in Small Cap/High Yield stocks. What does matter is the Outstanding Share Count [ O/S ] and the FLOAT. Insider Buying/Selling, Change in Revenue Growth, and Positive/ Negative PRs will also move a stock in the corresponding direction.

However, the one fundamental that does matter is PUBLIC SENTIMENT (taught to me by the Great Dardadog) and it matters the MOST. There has to Be buying pressure/accumulation of stocks in order for it to move. People have to be buying/ watching a stock in order for the potential volume surge to be there. Scanning message boards is a decent way to keep tabs on public sentiment. However, many liars lerk on the boards, so a few technical indicators can be used to filter the RUNNERS from the rest. This moves to me to my next point (Charting & TA).

2) Charting & Technical Analysis: Stock-Jock-e, Doodi, and Morbo have spent much time and effort on this site to teach the various advanced and basic methods of Chart Analysis (aka Technical Analysis). So I will not even pre-trend like I know as much as them. Please Refer to their Tutorials and Information for in-depth chart/indicator explanation.

Assuming that you understand the basics, check the Chart School @ www.stockcharts.com

And here is my chart set-up:

Bollinger Bands (20)
SMAs (10,32,50,200)
RSI (14)
MACD
Fast/Slow Stochs
On Balance Volume [OBV]
Momentum
Money Flow Index [MFI]

Here are things I look for:

Upper BB break or Lower BB bounce
Stocks above 10 SMA = Bullish
Stocks that break 50 SMA in an uptrend or bounce off of 50 SMA to end a Downtrend
^^^^ ditto for the 200 SMA

RSI divergence with price (for long term trend reversal) or just RSI turning up
MACD Fast line crossing Slow line, or more importantly the MACD turning positive for a multi-day play!!

Stochs: explained in another post

OBV turning UP (accompanied by a base forming)
MFI turning UP (mostly used on my intraday chart)

Momentum: explained in another post

3) Level II [a daytrader's art]: Level II is the art to master and will help you understand the difference betwee a DIP, a SHAKE, and the actual End of the Run. I will need a WHOLE POST to host a Q & A about Level II. I will Recomend one thing.

OPEN 3 Level II plays while Learning:

1) FIND the MOST active Nasdaq SC under $8.00

2) FIND the HOT OTCBB RUNNER for the Day.

3) FIND a stock that is in a DOWNTREND, and watch how the BOTTOM is FORMED.

the most important Level 2 tip: WATCH & LEARN. experience is a trader's friend

FYI: Exactly 1 Year ago, I watched SIRI Level II for 4 straight weeks in Oct.- Nov. I eventually learned how to call Entries and exits. I practiced and paper traded the twists and turns of the market. This got me good, and used to the quick flips. If only i had 25k

WATCH LEVEL 2 WHENEVER YOU CAN.........and WRITE DOWN WHAT YOU SEE.................MMs are RUN by Algorythmic Programs in most cases. Learn how to track/read them - and how to profit off of their moves.

[RPM]

Chapter 2: Creating and Using a Watchlist

First off bookmark these sites, which IMO are the best scanners/filters out there [and they are free].

http://stockcharts.com/def/servlet/SC.scan
http://www.otcbbtrader.com/portal/goto.dll
http://www.otcbb.com/
http://stockfetcher.com/
http://screen.finance.yahoo.com/newscreener.html

THE PHILOSOPHY of a WATCHLIST

Why We Look: The reason why Small Cap/Penny Traders create and use a watchlist is because you need to narrow down the Extensive Wealth of Available Stocks in the Market. Trying to watch 1000's of Stock Symbols would drain us of the time and energy which we need to make profitable trades on the few stocks that are actually GREEN in the Market.

Our Goal is to


"Pinpoint Opportunity" by finding stocks with the greatest upside potential.

"Assess the Adversity" by beginning to disregard Stocks with HIGH RISK FACTORS...........that could interfere with or hinder Positive Price Movement.

$$$ "Capitalize on the Momentum (or change in momentum)" by following the money trail and be on the Strong Side of every trade. $$$

[RPM]

"Pinpoint Opportunity" by finding stocks with the greatest upside potential.

Here is a - Watchlist Walkthrough -

There are two types of Stocks that make us money in the market [I will not discuss channeling stocks. Daytraders and Swingtraders can use them But my scans want ABNORMAL AVERAGE VOLUME.

Stocks can only move in 2 Directions.

1st; Stocks trending UP !!!

1) We can Profit Safely by seaching for Stocks moving in a STRONG UPTREND. These stocks (like any tradable security) must be played with caution, because if they reverse; we have to get out. However, the strength in the Money Flow behind them allows us to assess the trend and profit off of extensive Liquidity and the SMART MONEY along with the MMs pushing this forward.

However, we do not want EXTREME UPWARD MOVEMENTs. Any extremity in the market usually brings on a correction in price (by movement in the opposite direction). We want a proven and steady uptrend if we wish to profit. Check this thread as an example.

http://www.hotstockmarket.com/forums...ad.php?t=29186

2nd; Stocks beaten DOWN !!!

2) Although a little more dangerous; catching bounces can also bring us BIG MONEY within the Span of a 3-5 Days (sometimes sooner). When stocks move downward in extreme amounts........the market usually demands a correction, or at least a bounce before it continues down........ consolidates.... or actually begins a full reversal. Catching these is like catching a FALLING KNIFE....it can leave you bloody and severely torn. However, when you catch it; the power is now is your hands. Check this thread as an example of a stock ready to bounce.

http://www.hotstockmarket.com/forums...ad.php?t=29120

FYI: I Do Not even look at stocks over $10.00

[RPM]

SCANNING STOCKS TRENDING UP!!!

The Scanner I will use as an examlple for Simplicity's Sake is www.stockcharts.com

Here is the direct link: http://stockcharts.com/def/servlet/SC.scan

We want stocks which are moving in a positive direction with STRENGTH and VOLUME. Scans which we will be interested in are.......

New 52-week Highs

Strong Volume Gainers

Bullish 50/200-day MA Crossovers

Bullish MACD Crossovers

Moved Above Upper Bollinger Band

Improving Chaikin Money Flow

Other Scans can be used, but I will focus on these for basics. Remember that we do not want EXTREME gains. Rather, we are focusing on stocks that have support and/or have jsut broken and held the old Resistance. Here are some Bullish Trending Stocks from tonight's scans - - - with still some room to grow.

[RPM]

3

[RPM]

MOre coming, Going to try and Explain the ART of CATCHING bounces.....

FYI: I will try, but Buckeyeguy and RG are still the masters...........

[RPM]

MOre coming, but FOREX is calling my name right now.

Post feedback, or suggested topics in the Feedback thread.

Notice that I do not teach by the book. I intend to walk you through how I find, watch, and get into the MOVERS of the MARKET. JMHO, but for me it works!!!Booyah! JIM

[DarkTranquillity]

More please!