Thoughts on cutting losses. Dont make cutting losses complicated. It should be easy and quick for capital preservation.

Consider this; If you bought a stock at 2.80 to 3.00 range and have cut losses at 2.00 or 1.50 you can buy almost double of original number of shares when it falls to 1.28 and even if you only cut at 1.28 and intend to buyback at 1.00 or lower you can again buy more than your original shares and in the event of a rally it would be faster for you to recover your losses. What could be better incentive to cutting losses than this? It is but natural to be emotional in trading but is should not rule you. Holding on and averaging down has little strategic value in a down market. The Market Opening Why is the market opening important? One thing is it allows you to be either the first buyer or seller. Then what? In a bearish sentiment market, being the first seller saves you from incurring more losses as the price moves down, again cut your losses early, capital preservation is vital in this business. The same can be said in a market with a bullish sentiment, being the first buyer allows you to buy a stock at a lower price and you can easily hold or sell as soon as the price appreciate within the day. Strategies to deploy to make sense in a rally The first and most important is control your excitement! You should not be caught buying at the top, prices can open really high and then retraces back to a lesser level after several minutes, so again dont let your excitement lead you to buying high and scratching your head later. How to buy then in a rally? There will be gap ups across the board. The opening is one right time to buy however if you see a gap up of about 5% to 8%, better not buy yet and wait for it to stabilize before buying, if it would not go down and it is a blue chip stock, you can buy some to bet on its strength for the following day. If you are holding a stock you might want to take advantage of the initial surge, sell at the open and buyback when it retraces within the day. Emotions It is true that emotion is very hard to overcome. Imagine a trader calling his broker and placing a huge buy order an eerie voice from the broker signal a strong disagreement to the trader action. Between the two the broker is more afraid probably because he thinks it would not be done or why the trader is plunging his funds in a negative market. If the trader is susceptible to his fear, he would easily listen to his broker and taken the safest route which is holds any buying in a negative market. But because the trader follows a trading system such fear is mitigated. This is the beauty when you have a system you tend to deviate because you have calculated the risk involved as well as the probable outcome. Warren Buffet a great investor wrote it is only in Wall street that you find people who ride in luxury cars who get advises from the people who ride in the subway.

5 minute system to make money in the stock market from the Lion Do you recognize these traders statements? I did not get to sell because I priced it to high Blown a big profit opportunity because greed has taken over. Sold to early, profit should have been more, anyway profit is profit - Instead of greed it is fear who has taken over. I should have bought at that price, now I have to buy at a much higher price Sounds familiar? We normally attribute these mistakes to greed or fear as the culprit but is it really the psychology of the trader or the ignorance on getting the right entry and exit prices? Every trader encounters such mistakes in trading, yes, even the seasoned-players and traders with a trading system is vulnerable to such. Imagine how much more the frequency will be for lesser-seasoned traders to commit these mistakes. This is the primary characteristic of the stock market it is affected by many different factors both local and global event and news could change the market sentiment anytime. We cant perfectly time our trades but interestingly we can adopt a trading system that would minimize committing these mistakes or simply stacking the odds more in our favor. The objective of this system is to prepare us on how to maximize profits by way of buying stocks at calculated minimum price possible as well as by selling the stock at a calculated maximum price possible. This process should take you just 5 minutes. There is no system that is 100% guaranteed, it take practice. This is mathematics and art combined based from experience and logic that you might find not generally accepted. The mathematics part is easy it is the art part that would require experience this is because stock prices are ultimately moved by human emotions, like reaction to news, events and perceptions and it is human alone that trade the market. The art means knowing the sentiment of the market whether it is negative or positive. What is the right buying or selling price? These are prices near or within the range of the daily support and resistance level. We will not dwell more on how the calculation was derived, it has been subject to research and practice overtime and the formula over the years has become already a self-fulfilling prophecy. The formula to compute for the values of the daily support and resistance is: PP; Pivot Point = (H + L + C) / 3 R1; 1st Resistance level = (2 x PP) L S1; 1st Support level = (2 x PP) H R2; 2nd Resistance level = PP + (R1 S1) S2; 2nd Support level = PP (R1 S1) R3; 3rd Resistance level = R1 = (H L) S3; 3rd Support level = S1 (H L) Where H = high, L = low and C = close of the previous day

How do I actually sell or buy at these levels? We have to consider the following checkpoints to select the final buy and sell price. 1. Classify the stock and its trading range characteristics (the trading range characteristic - TRC is the percentage (%) range the stock can increase or decrease from its previous price relative to the current market sentiment) a. 1st Liners or Blue Chips stocks a. TRC on bullish sentiment : 2% to 7% up b. TRC on bearish sentiment : 3% to 10% down b. 2nd Liners a. TRC on bullish sentiment : 3% to 15% up b. TRC on bearish sentiment : 5% to 10% down c. 3rd Liner or Small Cap Stocks (Penny Stocks) a. TRC on bullish sentiment : 5% to 20% up b. TRC on bearish sentiment : 5% to 20% down The TRC is arbitrary and just based on past observation and experience. It can change overtime but should follow a steady pattern in the long term. 2. Assess the momentum of the stock a. Extreme momentum: R3; 3rd Resistance level will be bought up. These will be stocks with positive rumor, high volume transaction and closed at the days high and its the first day to go up. b. High momentum: R2; 2nd Resistance level and 2 to 3 fluctuations above will be bought up. These are stocks with high volume transactions, closed at the days high and its the first day to go up. c. Medium momentum: R1; 1st Resistance level will be bought up and possibility also R2; 2nd Resistance level. These are stocks with high volume transactions, its the first day to go up and closed 1 fluctuation lower than the days high or closed at the days high but with low volume and its the first day to go up or second day of going up and closed at the days high and with volume. d. Low momentum: Prices before R1; 1st Resistance level will be bought up and possibility also R1; 1st Resistance level. These are stocks with high volume transactions, its the first day to go up but closed 3 fluctuation lower than the days high. Again these are arbitrary and just based on past observation and experience. It can change overtime and there are a lot of combinations possible. This will be the art part of the system.

3. Assess the Market sentiment for the day a. Bullish market: R2 & R3 can be bought up. This is when the Index is up (PSE up 100 150 pts and Dow up 200 250 pts). b. Medium Bullish market: Prices before and above R2 can be bought up. This is when the index is moderately up (PSE up 70 100 pts and Dow up 100 150 pts). c. Light Bullish market: R1 and prices just above R1 can be bought up. This is when the index is slightly up (PSE up 50 60 pts and Dow up 50 80 pts). d. Bullish to Neutral market: R1 or prices before R1 can be bought up. This is when the index is up by minimal pts only (PSE up 20 40 pts and Dow up 20 40 pts). e. Neutral to Bearish market: prices before S1 or down to S1 can be sold down. This is when the index is flat or down by minimal pts (PSE flat 20 pts and Dow down 20 40 pts). f. Light Bearish market: S1 and prices 2 fluctuations below S1 can be sold down. This is when the index is slightly down (PSE down 50 60 pts and Dow down 50 80 pts). g. Medium Bearish market: Prices near S2 down to S2 can be sold down. This is when the index is moderately down (PSE down 70 100 pts and Dow down 100 150 pts). h. Bearish market: S2 & S3 can be sold down. This is when the index is down (PSE down 100 150 pts and Dow down 200 250 pts). 4. Reality check, how much are you really asking? Delta or increase or decrease from previous closing price. Ask yourself if it is realistic for the particular stock to go up or down at this percentage given the stock momentum and the market sentiment in general. If R1 is chosen as the price to sell, is the percentage delta is 3.28% If R2 is chosen as the price to sell, is the percentage delta is 8.20% If R3 is chosen as the price to sell, is the percentage delta is 14.75% To set an advantage over the other trader, either you sell at a cheaper price, a few fluctuation lower or take the first buyer, do not quibble over a one fluctuation loss. This is also the same in buying only on a reverse order. 5. Assign possible degree of realization to these deltas relative to the current trend momentum of the stock and overall market sentiment for the day to aid you on determining the final price. Degree of realization (DR) can be easy, medium or difficult. Sample: Stock has a very bullish momentum, PSE up 70 pts but Dow down by 50 pts. R1 with percentage increase of 3.28% is easy R2 with percentage increase of 8.20% is medium R3 with percentage increase of 14.75% is difficult

6. Identify the final price using all the checkpoints above. 1. Stock is a 3rd liner, the following pivot points are S1, S2, S3, PP, R1, R2, R3 2. Stock has an extremely bullish momentum (Positive rumor and super high volume) 3. Market sentiment is very bullish, PSE up 100 pts yesterday and Dow up 200 pts earlier. Selling price will be R3. 4. Checking the percentage, the delta of R3 is 14.75% 5.