Richard Day

Typical investors lose money trading. Here is a partial list of the issues they possess and how to resolve them.
They have trouble taking profits.

1. They cannot take losses.
2. They wait too long to insure that the trend is in place, only to get in just in time for a pullback.
3. They lose two times in a row, and refuse to take the next trade - therefore, they fail to recognize the big move.
4. They trade stocks and don't take into account factors that can influence the stock's price.
5. They trust that "buy and hold" works.
6. They go long a down market.
7. They go short a bull market.
8. They invest too much of their capital in a single stock or trade.
9. Investors, generally, are much too swayed by emotion.

This article gives you a financial market timing technique for the S&P 500. The S&P 500 represents 500 stocks, as you probably appreciate. Since the S&P 500 is an index and isn't traded, you will need to trade the exchange traded fund called SPX. The SPX which represents the S&P 500 moves smoothly, and by and large unexcitedly. Unless you are highly accurate with your trade entries and exits, you probably won't profit trading SPX in the short or intermediate term. You need a set of tools, or at least a collection of principles. Continue reading, and you will have these principles.

Because the SPX represents 500 stocks, you won't see the outrageous moves you might expect if you own an individual stock. If you have traded stocks, you know that they can be volatile. If the CEO gets perp-walked away in manacles, if the company under-performs, or their drug doesn't get accepted, expect great movements in that stock price

If you own an individual stock through its earnings announcement, you very likely will be surprised by the extent and violence of the move - commonly against you, it seems.. You won't have to worry about earnings announcements, if you trade SPX. There are so many stocks represented by the SPX, the earnings announcements factors are diminished or dissipated.

Tools to use to trade SPX:

Leveraged ETFs
Many traders don't think you can profit trading SPX in the short term or intermediate term. You must have a long-term horizon, or use leverage. Leverage can be provided by trading options on SPX, or, a much simpler method is to trade leveraged ETFs like SSO and SDS.

SSO is the 2X bullish leveraged ETF and SDS is the 2X bearish ETF. With a leveraged ETF like SSO, a 5% move in SPX gives you nearly a 10% move in SSO. You can trade the bearish ETF, SDS, if you want to profit from a descending market - even in your IRA account.

Money management
You will need to exercise money management if you want to gain from trading SPX. In fact, you will need money management if you desire to trade any stock, option or ETF. Here is a tested, easy money management technique that works exceedingly well. It is based on the movement of SPX.

The money management or if you prefer, risk management method, is rather simple: When SPX has moved in your direction by 5%, you sell 25% of the shares you hold. If you get another 5% move in your direction, sell one-half your remaining shares. Sometimes SPX will move 15%, in your direction. This is rare, but it has been happening. This has been happening more frequently since the Federal Reserve has been employing quantitative easing, QE1 and QE2. Many pundits think quantitative easing has accounted for the current, persistent rise in the stock market.

You must resist your greed! If you don't take profits when they are there, they will very likely disappear from you. If you have been trading for a while, I am sure you will agree with me that It is bothersome to take profits - we are all so greedy. I would judge that you have lost profits on a great trade that unexpectedly turned around on you.

Use a Market timer
How do you predict what the market is going to do? A market timing service is your best tool. Humans are amazingly poor at predicting which way the market is likely to move. Even people who have been trading for years, find that employing a market timer system makes a big difference in the results.

Leap of faith
Following any market timing service is confusing. Traders can look at the actual performance results of a timer and still think that they can do a better job. If you have trouble following a market timing service, then make your trades smaller. Eventually, you will gain the fearlessness you need to trade larger amounts of your capital. By the way, I have met very few human beings who can consistently out-perform a good market timing service. Stock market mavens are much too emotional.

To summarize: Don't trade individual stocks. Trade a leveraged ETF acting as an agent a broad-based index, to bring about diversification. Use a money management approach. Subscribe to a market timer service. Get control of your feelings so that you can follow the timer. Adopting these tips will improve in your success at trading.