Don't let someone else tell you how to invest your money!
It's always your call...
- It is natural to look for an easy way to start investing. Or an easy way to continue investing because you are tired of losing money. What you really need is more knowledge. More experience. More time to learn. And a good teacher.
- I am not saying you shouldn't subscribe to some investing service or some trading room. All I am saying is that every time you spend your money it should be your decision. You should know why you are hitting the "submit" button on that order. You should also know when, and how, you are going to cut your losses if the trade goes bad. This is not easy people. All of us struggle with the reality that we made a bad decision. And what if the trade goes good? When do you get out?? Sometimes this is an even harder decision.
- If you are invested in AAPL or YHOO you may be wondering what to do now. If you are not invested in anything but you want to get involved because "everyone else is making tons of money", realize that some people are making money. But there are definitely some people losing money. Even in this market which is at all time highs.
- Let me circle back to my opening paragraph for a moment. More knowledge will come as you read more. You have to learn to distinguish between facts and opinion. More experience will come as you make more trades. But it will likely come with a financial cost. Unless you are "paper trading". Let's be honest, paper trading is great when you can walk away from a "paper loss" and start over. But paper trading SUCKS when you make a huge "paper gain" because you got a trade just right.
- And about that good teacher. Good Luck to ya. There are some traders / investors out there that would make great teachers. But they aren't accessible to you and me or they want more money every month than is affordable to most. By the way, there is never a guarantee that you will make money. And you can't expect one. This market isn't a place where guarantees work.
- So why am I rambling instead of showing charts? The charts are next. But investing is rarely like going to school and having someone show you exactly what to do. You have to learn by taking little bits from many sources and putting the bits together to form a cohesive plan. I hope this blog is one of your bits.
C - Citigroup
It's your call...
This is a daily chart of C
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| Click the chart for a larger chart of Citigroup |
- Citigroup has been in a range (between the two gray horizontal lines) since about March of 2013. The price did dip below the range once in 2013 and rose above the range once in 2014. You will need to look at a 2 yr chart to see it clearly.
- What I am trying to show you is two things. 1) The lows have been getting higher & higher since April of 2014. Notice the green uptrend line that touches the lows. 2) The price just approached the top gray horizontal line and now looks like it is heading lower. Notice the short red downtrend line that touches the highs.
- If you want to invest in or trade Citigroup you have a decision to make. If you think it will go up from here then it needs to stay above the 21 ema (yellow). If you think it will go down from here then is has to stay below the red downtrend line. It's your call...
TSLA - Tesla Motors Inc
It's your call...
This is a daily chart of TSLA
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| Click the chart for a larger chart of Tesla |
- Tesla has been following the same uptrend line (UT 1) since mid 2013. Going long when TSLA is close to UT 1 has been a great investment. Take a look at a daily chart that includes all of 2013 and you will see what I am talking about.
- I know there are several lines on this chart so it may seem confusing at first. But let me explain... If a trend line doesn't have a UT or DT label then ignore it. Those are old trend lines that I am not talking about in this post. I guess I could have removed them but I didn't. Focus on DT 1, UT 1, and UT 2. We have already talked about UT 1 and how it has been intact for about 1.5 years. UT 2 has only been intact for about 3 weeks. But it is crucial that you realize the price of TSLA is following UT 2 at the moment. DT 1 was intact for all of September & October. What is important about DT 1? The fact that TSLA's price is now above it.
- How do we invest or trade TSLA from here? If you think it will continue higher then it has to stay above UT 2. If you think it will go down from here then I guess it has to stay below the gray horizontal line.
- If you were short while TSLA was following DT 1 then you should have exited that position at the beginning of the week. If you were waiting on the sidelines for a hint that TSLA was done going down, that hint came at the beginning of the week when the price closed above DT 1.
If you initiate a trade right here,
how do you know if you made a bad decision?
- One way is to only allow 3-5% of your money to be lost. But that is arbitrary and only you can make that decision. I like the range but if you don't enter a trade at the right time you could loose every time.
- Another way is to use a trend line. If you feel TSLA or C are following a particular trend line and that trend line is breached, then you should get out of the trade. What about the percent range? You would've known how many percentage points you were risking before you entered the trade because you know where you were buying and you knew the price level of the trend line at that point in time. If you weren't willing to risk that many percentage points then you shouldn't have entered the trade.
- Let's look at C first. If you go long right here, you have to realize that C could go all the way down to the Uptrend line... Ouch!! That is a drop of about $4 from here or 8%. Not my idea of a good entry. If you go short right here, you want the price to stay below the red downtrend line. Which is about $0.60 above Friday's close or 1%. I can accept that kind of risk. Either way you have to constantly evaluate your trade.
- Let's look at TSLA. It you go long right here, the price has to stay above UT 2. If it crosses below UT 2 you should sell because chances are good it will go to UT 1. You could buy it back when it gets there. If you go short right here, I would call you crazy :) But seriously, I would wait until the price closes below UT 2. If it gets that low, watch for a turn back up at UT 1. If it gets below that, I will short it with you...
Anything can change at anytime! You have to constantly evaluate your trade. If it is working, hang in there, adjust your trend line, and be patient. If the trade is not working, get out of the way! Don't be patient, don't hang in there, don't adjust your trend line. You can always try another trade later on down the road if you still have money left because you were disciplined enough to get out of a bad trade...
Trade what you see... Not what you think, or feel, or hope, ...
The trend is your friend... Until it's not.
Limit Risk & Protect Profits!
