If you are interested in making sense out of the stock market, then you have come to the right place. HBJ Capital  would like to take a moment and explain a few things that might help new traders gain a better insight into what trading is all about. Every valid market approach needs three elements to be effective.

A professional trader isolates himself from the herd and has trained himself to become a predator rather than a victim. He understands and recognizes principles that drive the markets and refuses to be misleading by good or bad news, tips, advice, brokers’ advice and well meaning friends. When the market is being shaken-out on bad news he is in their buying. When the Herd is buying and the news is good he is looking to sell.You need to get expertise in market timing which is 100% a MUST thing for any successful trader. It’s anti-trend, it’s contra trend, its pattern recognition and price exhaustion are something you need to understand well before trading actively.

Approach

1. The first element is the approach itself, sometimes called the system.

There are thousands of them for sale, some work and others do not. Regardless of the profitability of the approach, they all attempt to guide you, by various means, into selecting a trade.  There are numerous books, seminars, software packages and training manuals devoted to teaching people a “valid market approach.” Some of these approaches are based on fundamental analysis (price earnings, balance sheets, economic conditions, etc.), while others are based on technical analysis (a manipulation of price, volume and open interest to generate various “studies” such as moving averages, oscillators and trend fold indicators).  Most people use fundamental analysis while fewer use technical analysis.

2. The second element is the money management aspect of the trading system.

This area has come a long way over recent years with a current emphasis on the importance of position sizing.  The important point of money management is that it must be tailored to the type of approach you are using, to insure you achieve the anticipated results.  You can have a valid approach and apply poor money management and lose money. Or, you can have a poor approach, and apply good money management and still stand a chance to make money. Money management will turn a losing trader into a winning trader, it is very powerful!

Almost all market approaches neglect this important area.  Just think of the racecar driver that really believed he was going to crash.  What chances would he have of success? How about if he had the belief that it was okay to drink alcohol the day before his race, or that he didn’t need to keep himself in top physical condition.  A professional racecar driver, or athlete, or doctor or any professional for that matter, needs to have the proper belief system in place in order to be successful.