Fed - When Fed used its last bullet

Fed reduced 1/4 point for the 2nd time, on the day of the announcement market rised 140 points, but on the next day of this announcement, market dropped 230 points.

Because peoeple think this would be the last time Fed reducing interest rate. Further reductions will cause the US Dollar inflation more.

When Fed used up its last bullet, what else can the Fed do to prevent a economy slow-down or even upcoming recession? People don't know.

UNCERTAINTY is bad for the market.

Emotion - self encourage

1) Losing is part of the business

2) There is risk in trading; there is risk in NOT trading as well.

3) There were times no matter how you picked you would lose; also there were times no mater how you picked you would win

4) Have faith - think big; don't be a chicken - following too sensitively

Strategy - What affects stock price

1) Internal Forces - Fundamental analysis; EPS; Ratings; Projection; News

2) Trading Activities - Technical analysis; Gold rush; Panic sell off; Profit taking; Bargain shopping; Stock purchase plans

3) External Forces - Market Weather; Marco Economy; Interest Rate; Politics; War; Disasters

Concept - Risk

What is Risk?
1) Risk is unknown danger; possibility of loss
2) Risk can be calculated, limited, and managed
3) Risk can be pre-determined
4) Risk exists even when not doing anything

Concept - Trading

What is trading?
1) Trading is betting the future.
2) Trading is an on-going, cross-field game with mass of players.
3) Trading could have many outcomes; will trigger many emotions.

What is NOT trading?
1) Trading is not an hourly paid job.
2) Trading is not a competing game.
3) Trading is not an exact science.

Rules - Golden Rules on Stock Trading

1) Ride the trend. Let winners run
2) Use stop orders. Cut losers quickly
3) Buy the rumors (sell the facts)
4) Don't over-trade. Make few key moves. Have long-term perspect
5) Focus: Follow a few stocks, don't analyse too much information
6) Diversify (sectors, commodities, bonds, global)
7) Buy liquid stocks
8) Go where the HOT-MONEY's go
9) Buy value/bargain stocks (investments)
10) Keep doing what worked in the past

11) Don't be ignorance, always think ahead - what could be next?
12) Don't be a chicken, don't become too sensitive, don't do nothing

Emotion - emotions not good for trading

1) Can't make up the mind: Always thinking both sides, worrying too much, afraid of taking chances, perfectionist,

2) Follow the crow: Human beings are social beings. We don't want to be left behind/alone by the society, or look "strange" to other people. We want to stay with the crows, so we move when the crow moves, stop when the crows stop.

3) React to news/rumor: When the news is good we feel happy, when the news is bad we feel worried, and when the news is mixed we feel confused. Too sensitive.

4) Work more to earn more: Trading is never a sure thing. Working more or knowing more doesn't translate to earning more. Educated hard working professionals can be making less than "lucky fools" all the time.

5) It's too expensive: Just seeing the price alone is never enough. Fact is good things are expensive, expensive things can become more expensive. Vise versa, cheap things could lose value quicker.

Emotion - People is the Market

1) People are emotional creatures. We tend to belive that we are rational or at least somewhat rational. We always try to analyse material facts and come up with "reasons" for our decisions, but our actions proved that we were driven by our emotions all the time.

2) All human sciences are developed by studying the pass. We tend to belive that the near past will stays the same in the near future. That's why when the market is up we felt happy; when the market is down we felt sad.

3) The extend of 2) is that people believe that the history will repeat itself in the future. So we belive in "economy cycles", "market patterns", etc. However future outcomes are often unexpected or just completely random.

Conclusion: Any thing could happen in the market. The pass does not gurantee the future. If you know what people will do, you know what the market will do.

Emotion - Source of Greed & Fear

FEAR: Lost / Risk / Uncertainty / Pain / Insecure / Embarassment / Hardship

GREED: Reward / Winning / Ego / Profit / Freedom / Relaxation / Fame / Power

Strategy - Types of Trades

Group by hold period or trade frequency
1) Mega Trend
2) Momentum
3) Sculping
4) Day Trading
5) Buy & Hold / Stock purchase plan
6) Buy IPO

Group by market timing
1) Leading / before signals
2) Lagging / after signals
3) In sync / on signals

Group by pricing
1) Buy low sell high
2) Buy high sell higher
3) Buy before expansion, sell before compression

Group by reasoning
1) Foundamental Data
2) Speculation / News Play
3) Technical / Chart Reading
4) Emotional / Follow the crowd
5) Insider trading
6) Risk management (stop lose, cover short, option expired)
7) Diversifying / Stock rotation
8) Goveronment actions & policies
9) Academic studies / Software testing

Fed

The Fed took couple actions recently: Released reserve fund 3-4 times to buy mortages, and real estate sectors, trying to save the market confidence hurted by the Sub-Prime loan problems. Also reduce overnight discount rate 0.5% to help suffering lenders like Countrywide Bank.

Other contries's central banks also did similar acts.

But will the Fed lower the interest rate?
Is the market turning into a BEAR?

Daily

Bullish: YHOO, AMZN, REM,

Berish: AMGN,

Market:
Is market going to end this correction cycle and rebound from here?
The bottom has shown already, important supports are 13000, 13200

Market

Dow broke 13200 points, is this becoming a Head-and-shoulders formation?

Daily

Bullish Buy: IYR, IAK, HSY, AMAT, HPQ, MRK, PGN, BUD
Bullish Watch: DIA, ITA, MO, K, FNM, MSFT, SNE, EWW

Bearish: FSLR, UAUA, JYN, IEF

Market Projection: Market will rebound on Friday!

Daily

Bullish: SPY, HSY, AMAT, MO, HD, HPQ, MRK, K, FNM, MSFT, PGN, BUD, SNE

Bearish: FSLR, UAUA

Market: Unclear

Daily

Bullish Buy: SNE
Bullish Watch: K, FNM, MSFT, MER

Bearish Short: SNDK
Bearish Watch: UAUA

Market Forecast: DIA - Neutral / QQQQ - Bearish

Daily

Bullish: IAI, IAK, IDU, IYM, K, DNA, PGN, LMT, MSFT, HD, FNM, MER

Bearish: SNDK, UAUA

Market: Short Term: Will be less volatile
Long Term: Neutral

Daily

Bullish: IAI, IAK, IDU, K, DNA, PGN, LMT, SNE, HTB

Bearish: GE, REM, IHI, IYR, ITA, UTX, UAUA, SNP, EWY, FXI

Market: Short Term: Continue Bearish Atmosphere, Possible Small Re-bound.
Long Term: Bullish

Daily

Bullish: FRE, K, PGN, DNA, SNE, HTB

Bearish: GE, REM, XOM, UTX, TASR, LUV, UAUA, CHL, SNP, EWT, EWY, FXI, PTR

Market: Short Term Bearish; Long Term Bullish.

Daily

Market: Long term bullish, Tomorrow uncleared

Bullish Watch: LMT, FRE, K, PGN, IBM, SNE, CHA, TM

Bearish Watch: IGN, IGW, IYE, GLD, JDSU, XOM, FNM, UTX, FDX, TASR, ERO

Intro

This blog is created to post & track my stock trading analysis, thoughts & results.