100%!

We want to thank all of you for your tremendous support! Due to the number of recent sign-ups, we are no longer accepting new students. For the time being, we have reached 100% capacity – all of our classes are full. Until further notice, we will not accept new students nor will we accept renewals.

If you are a current student, your status is unaffected by these changes.

You’ll also notice that we’re currently making some changes to the website…more on this at a later date!

Again, we’d like to thank all of you for your tremendous support, we really appreciate it!

 

Ed Ponsi

Stock Swing Trading Strategies

Oscar Wilde once described a cynic as a person who knows “the price of everything and the value of nothing.” In my profession, I see many instances of investors who know the price of a stock, but have no concept of its value.

The problem we face as traders, is we are entering, booking profits and taking a loss on price, but we are seeking a perception of future value in order to spur demand to a new price level.

A conundrum indeed.

  • Is the right decision based on current price action or future value?
  • Are they the same concepts?
  • How much is not knowing this little difference costing you each year?

There is truth in price.

Price is the ultimate indicator, in that the price at which a stock changes hands tells us much about the company it represents. All of the forces of supply and demand combine and converge, resulting in a ‘market’ price at which the stock trades.

The market price represents the fair price of a stock, or a bond, or a currency, or a house.

Or does it?

Price isn’t perfect, nor is it infallible.

If it were, then markets would be efficient. Yet there is significant evidence that markets are anything but efficient. Was the market efficient, and therefore correct, when it priced Apple at $78 in 2009, or when it priced Apple at $700 in 2012?

In the first case, the stock increased by nearly nine-fold. In the second case, the stock was below $400 just a half year later. If markets were truly efficient, stocks would not gyrate on a daily basis; nor would they move up and down as a group.

They’d lie flat until new information was released and absorbed by the markets, find their new levels, and then lie dormant again.

The idea of price as the final arbiter is largely a technical concept. It is an actionable concept, particularly in terms of entries and exits. However, if we don’t understand value, we may find ourselves calculating entries and exits on stocks that we should have avoided.

What does this mean for you?

It is absolutely essential to understand how to use fundamental valuation techniques. Otherwise, we run the risk of placing trades based on the value of nothing.

Do you know how to determine if a stock represents value? It’s not an arbitrary concept. There are a variety of effective ways to understand value, as it pertains to a stock, a sector, or index.

Let’s Continue this Discussion in a Live Format

Join me tomorrow night May 28th for the next edponsi.com webinar.

Reserve your spot today.

We are near capacity for the event, be sure to get your name on the list today.

This promises to be a great event to help you move closer to understanding swing trading strategies and accomplishing your swing trading goals.

How to Make First-Class Swing Trading Decisions

How to Make First-Class Swing Trading Decisions

Most swing traders have it wrong…

A winning swing trade is a good idea before the trade, not after- simply because it made money. Winning means you accepted the risk in a good idea and placed a trade. The price action after your entry is up to the institutions.

For us to make first-class decisions, we start by asking the right questions.

How can we find the best trades? What gives us the edge?

Which method increases the probability?

Why Fundamental Analysis Makes Sense

Should we use fundamental analysis, a technique championed by legends like Warren Buffett? Should we use fundamental valuation metrics like a forward price-earnings ratio or enterprise-to-EBITDA?

Why Technical Analysis Makes Sense

Or, should we use technical analysis, a method championed by hedge fund manager Paul Tudor Jones? Should we rely on trend lines, patterns, and moving averages to tell us where and when to buy and sell?

Choosing the Right Strategy

Which hedge fund billionaire shall we emulate, Buffett or Jones? They’re both very successful at what they do, so neither of them are ‘wrong.’ Which path is the right one to choose?

Can we blend the best of both technical and fundamental analysis into one strategy? Could we reduce inferior trading opportunities by applying both technical and fundamental criteria?

pb&j

Peanut Butter and Jelly: the Best Choice

Why only use one when both are available?!

That’s exactly what my 20/20 strategy provides. I teach this advanced strategy in more detail in the online course. Here are the basics:

The 20/20 strategy uses:

* A fundamental screen to isolate companies with superior fundamental characteristics,

* Then applies technical analysis techniques to determine the exact price points at which to enter and exit trades.

It’s the best of both worlds, combining strong fundamental characteristics with superior technical setups.

Hedge Fund Style

Best of all, a separate version of the 20/20 turns the strategy on its head. A modified version of the strategy pinpoints stocks with weak fundamentals and bearish technical setups.

Used together, a trader can find great opportunities on both the bullish and the bearish side, and hedge these trades against one another – in other words, trade just like a hedge fund. He or she can tilt the portfolio to the bullish or bearish side, depending on the direction of the overall market, or place market-neutral trades.

It’s all part of the 20/20 strategy, which encompasses just a small portion of the swing trading stock course. Why choose between technical and fundamental strategies when you can have the best of both?

Join me for the coming webinar on May 28th to learn how I scan for the fundamental side of the trade.

Click here to reserve your spot. We are currently at 65% full, be sure to register today.

Why Swing Trading Earnings Season Is Not For Everyone

trading earnings season

When I first started trading, price action was crazy.

That’s the only word I can think of when I look back on those days. April of 2000 the NASDAQ had not peaked yet but was very close.

I was learning from traders who were about to lose most of their money to the bubble. They were teaching us to place orders far outside of the market then trade out of it when you get filled.

The crazy thing was, we actually got fills at prices you would never had expected. The problem was I had no idea what to do after I got filled.

The same crazy volatility that offered profits wrecked my account because I couldn’t handle the volatility. I needed to find a strategy that matched my resources and experience; and I had to find it in a hurry.

Today’s market doesn’t have the same volatility but earnings season could. You should trade it because it makes sense for you, not because there is gold in the hills.

How Earnings Fundamentals Change Your Swing Trades

I will be the first to admit I was mostly reared on technical analysis. “The charts discount the news.” For the most part I believed this, it makes sense.

My friend Mario Carias who finally made me understand I didn’t need to dig into piles of financial statements, but if I bought companies with solid fundamentals, I had an edge stronger than the slope of a moving average. Ed Ponsi teaches the same thing, success leaves clues.

When to Combine Fundamentals and the Charts

Both mentors preach the same song. Determine a good company to buy first, then look for an entry and manage risk with the charts. Ed is a frequent guest on business shows including CNBC and the author of 3 books. Mario is a CFA and Director of Education at New York Society of Security Analysts. This is some pretty good advice.

Could I continue to only swing trade using charts? Yes. But it would be like driving in heavy rain without putting on the wipers.

I have the tool, I need to use it.

How to Find Good Companies to Swing Trade

Savvy investors like Warren Buffet have rules for measuring the value of a company. The rules are fairly simple and tell us if a company is overvalued or undervalued.

If we believe it is undervalues and sets up well on the charts we can swing trade from the “long” side or be a buyer.

What about short selling overvalued stocks? This is a much more aggressive play as stocks can remain overvalued from a fundamental perspective or “overbought” from a technical perspective for quite some time.

Determine minimum criteria for a solid company and stick to your rules. Never deviate, that’s where hesitation lives. The less committed you are to your plan, the greater the odds you will not follow it.

Which Fundamental Data Is Enough?

Ed will discuss this in a little more detail in the webinar at the end of the month for now let’s list potential fundamental criteria to consider:

  • Market cap
  • Debt
  • Insider holdings
  • PE ratio
  • Cash flow
  • Growth rate

As a pure technical trader I have taken a step to the other side of the mountain and believe adding some technical criteria is smart. I don’t stay up late with candles a calculator and a pot of coffee but I do research to give me some extra conviction to the ideas I may find on a technical screener.

I guess you could say I do the process in reverse but opening up to learn how the other side lives has taken my swing trading to a professional level I didn’t have before.

Coming Event: Webinar

Be sure to join us for the coming webinar. Ed will be discussing these concepts. A big reason to attend is not only to find new ideas but also eliminating some bad ones which results in keeping your pile of cash safe until the next great idea comes along.

Attendance will be limited so we recommend you reserve your spot today.

You can register here for the webinar on May 28th.

How to Hunt for Better Swing Trade Opportunities

I don’t hunt, but I trade and that’s kind of the same thing. Hunters sometimes wait in a hiding spot for days, waiting for their prey to appear. Trading can be like that; it requires patience above all else. I’d rather place one good trade than dozens of mediocre trades, because one good trade will make more money than firing off countless wild shots.

One trader had an interesting perspective on trading and the animal kingdom. Futures trader Mark Weinstein was once quoted as saying:

“Although the cheetah is the fastest animal in the world and can catch any animal on the plains, it will wait until it is absolutely sure it can catch its prey…it will wait for the baby antelope and not just any baby antelope, but preferably one that is also sick or lame. Only then, when there is no chance it can lose its prey, does it attack. That, to me, is the epitome of trading”.

When to Pull the Trigger

Now consider what most traders do. To use a hunting analogy, they run into the woods firing wild shots at anything that moves. They may believe this is the correct approach, but the experienced hunter knows that an out-of-control weapon is more likely to injure the shooter or an innocent bystander than the actual intended prey.

As I said, I don’t hunt, but I have a feeling most hunters would be swing traders. They have the patience to wait until the right opportunity comes along. It’s time for you to take this opportunity to become a swing trader.

Why Swing Trading will Reduce Trading Stress

Leave all the hair-trigger trading nonsense to the amateurs, and join the professionals. We trade less, and make more – it’s a lifestyle thing. It means you’ll have both the time and the money to enjoy your pursuits. Maybe that means more time to hunt, or to travel, or to read (or write) a book, or to just lay on the beach. It’s your life. How do you want to spend it?

Register Here for FREE Stock Trading Strategies Webinar May 28th 7pm EST ( -5 GMT )

Second Chance Entries: Your Untapped Profit Center

second chance entries
How Second Entries Make You a Better Trader

Whoever said opportunity never knocks twice, was never a trader.
Real trades, the good ones, offer you more than one chance to make money. Today we discuss how to spot them so you can make money the next time it happens.
And trust me it will happen. When you gain this skill you will earn money when others are complaining about the lack of opportunities. Sorry, but you will not RSVP to the pity party.

Sometimes a missed trade can turn your stomach more than losing money. We see it coming a mile away and for whatever reason we miss the entry. It could be a gap or maybe we were simply looking at another group of stocks.

The point is we did the hard work to find the A+ idea and we missed the entry.
Now what?

What is a Second Chance Entry?

Before we discuss the entry itself, we need to set a baseline.
For a second chance entry to exist, you need a trade that shows institutional action. The kind of buying and selling pressure that confirms a “real move.” How do we spot such action?

Close your eyes and picture a momentum type of price action. An explosion in price higher or lower. Now what would need to happen for that move to be significant to you?

It holds. It does not trade back into the price area from which it was born.
So we missed the first explosion but it holds. The big money is around and supporting the initial move. This is where you transform from student to trader.
This opportunity is just getting started.

Look at any chart. Find the initial burst and then write down what happened next. Real trades offer multiple opportunities to make money.

This is the Second Chance Entry

Why Second Chance Entries Get no Love

To date I have authored 7 trading courses so I have some experience why the second chance entry is the red-headed step child.
We exert so much effort to finding a good idea, we foolishly go back to the drawing board if we miss it.

As traders looking to rise to the next skill level, we must focus on the quality of the idea and not only the first entry. The first entry is sexy, entries two and three are harder work. That’s why they don’t become the hero of the trading book. Nobody wants to read about hard work.

Ed plans to cover this a little more in the webinar at the end of May, so this is just a primer on the topic. Be sure you make plans to attend.

Why Second Entries Should Be Planned

Aside from high probability ideas we want calculated and acceptable risk in exchange for the potential reward. Second Chance entries typically are those that give us a clear risk point. The profit target needs to justify the risk but when done properly your risk will be small and clear.

Which Are The Most Common Second Chance Entries to Prepare For?

Breakouts, break downs and change of trend offer the best second chance ideas.
Support and resistance shows us where buyers or sellers last did something significant. When price action finally musters the energy to break through, you will plan to notice if the move “holds.”

This will be the second chance entry. When institutions show their hand and support momentum.

Head and shoulders or a simple trend line break often ignite fast moves as one side of the battle is caught off guard and needs to get out quickly.
This usually happens when the last pull-back does not follow-through. The last buyers or short sellers are caught and need to get out. The short covering or panic selling breaks the trend or neckline quickly so it can be common to miss the first move.

You will be ready to pounce on the second chance entry.

Applying Second Chance Tactics

Two things need to be in place to make money with this tactic. The right mindset and patience.

You need to always be thinking there will be always be another trade on the way if you did a good job finding order flow and a potential significant reference point.

The second is to fight the urge to go to another stock if you missed the first entry while at the same time waiting for an entry that makes sense from a risk/reward perspective.

Spend some time cycling through charts to spot second chance plays. You will be glad you did.

Once again be sure to attend the webinar at the end of the month. Ed will be focusing on topics surrounding swing trading stocks.

Click Here to Register Today

Weidmann Speaks on Euro, Stimulus

Jans Weidmann is the head of Germany’s central bank, the Bundesbank. It was widely reported earlier this week that Weidmann and the Bundesbank were on board with any potential new European Central Bank stimulus programs. ECB head Mario Draghi has made near-constant allusions to various programs the central bank may undertake in order to stimulate Europe’s economies.

So it may come as a surprise to some that Weidmann just announced that he hasn’t agreed to any new policies. Interestingly, he also poured some cold water on the notion of a Eurozone version of QE, saying QE isn’t a suitable solution for the problem of low inflation. Euro barely reacted to the comments.

To be fair, Weidmann did say that the ECB was open to taking action, but qualified that statement with ‘if needed’. He also stated that the ECB would’ve acted last month, if needed. The implication being that no action was needed at the last meeting, as indeed none was taken.

Bottom line – Weidmann seems considerably less committed to stimulus today than he was portrayed yesterday.

New Interview (en Espanol)

Hola! For all my Spanish speaking friends out there, I hope you enjoy this interview.

How a Simple Fundamental Observation Can Save You Money

Your wealth was in imminent danger.

Big money shifted gears and a lot of swing traders got steam-rolled.

Did you see it coming?

Those who caught it early avoided big losses in high-flying tech stocks, and instead made money in value stocks.

If you don’t understand fundamental analysis, you may have missed this major change entirely.

 

There Is More to Fundamental Analysis Than Balance Sheets and Income Statements.

Let me explain

What is fundamental analysis?

Traders examine a stock to determine if it is overvalued, undervalued, or a fair value. In his book Behavioral Investing, author James Montier states that in the long run, value stocks outperform growth stocks.

Right now, we are in the midst of a shift away from growth stocks, and toward value stocks.

Is fundamental analysis important in stock trading?

Consider this; in the first half of 2014, traders dumped the high-flying growth stocks that led the charge in 2013, and bought up value stocks instead. At what point did you identify this important change?

No need to be a CPA to have seen this unfolding. For my students it was like the big money bought a billboard in Times Square and said “we’re moving to something else.”

 

How to Read the Signs

Over the next couple of weeks look for some essential swing trading topics and skills so you can improve your confidence. Check your inbox and the blog so you can the lessons to work.

The simple fundamental observation covered here can position you to be in cash when the institutional order flow becomes obvious again.

This is a key to growing your swing trading account. The coming lessons are focused on two core beliefs we teach at edponsi.com: learn to control risk so you can net more.

 

Until next time,

Ed

Euro – Draghi Jawbones Again

I’ve got to hand it to Mr. Draghi. Once again, he’s prevented the euro from breaching 1.40 against the dollar (learn how to trade the euro here).  The ECB head continues to find ways to repackage old threats to make them appear new. Having already repeatedly threatened a variety of actions (rate cut, LTROs, negative deposit rate, QE), now he’s added a time element.

Speaking at this morning’s ECB presser, Draghi stated that the Governing Council was “comfortable with acting next time”, meaning June. Euro, which had climbed within a few pips of 1.40, swooned to below 1.39. Seriously, did they not expect more jawboning from Draghi? Why would this meeting be any different from prior meetings?

Look, the ECB’s minimum bid rate is 0.25%. The ECB can only cut it by that amount – something they’ve already done this year, to no effect. Honestly, I doubt if an actual rate cut today would’ve been as effective as this latest round of jawboning. The question is, at what point will traders realize that they’ve just sold the euro for the umpteenth time for the same reason?