Think Like a Trader to Limit Your Risks and Pocket 28% Weekly Gains

The Penny Sleuth Features: Penny Stocks, Options and High-Growth Opportunities! Think Like a Trader to Limit Your Risks and Pocket 28% Weekly Gains By Jonas Elmerraji March 10, 2011 Dear Penny Sleuther, When most “Main Street” investors think about traders, they envision people taking massive risks and churning their accounts constantly to eke out small gains over and over again. In reality, though, that mental image isn’t very accurate; for real world traders, minimizing risk is everything. Whether you’re a long term buy-and-hold investor or a short-term speculator, thinking like a trader can substantially limit your risks — and increase your potential portfolio gains this year. When it comes to investing, people like to talk about the risk/reward ratio, the idea that the more risk you take on the greater the rewards you stand to reap. It’s a concept that plays out all over the industry: safer investments like bonds and CDs pay a lower return than riskier investments like stocks. Essentially, you’re being paid to take on the added risks of investments that aren’t a “sure thing.” Urgent Profit Alert to Hit Your Inbox on Wednesday... Witness strategy that produced 97% success — 123 winners in 127 moves! Your profits could start as soon as Wednesday. All the details — right here. But the risks of even the most volatile investments can be limited by taking on the trader’s mentality... One of the best ways to do that is by using a technical analysis concept called “resistance”. In short, resistance is a sort of price ceiling for shares of a given stock — it’s an area that shares have difficulty moving above. Resistance may sound complicated in technical analysis parlance, but the guiding principles are easy enough to understand. Basically, areas of resistance are pockets of excess supply that exist for shares of a stock. Maybe it’s an area where investors see shares as “expensive” or a previous level where shares failed to move above, prompting current owners to attempt to unload shares. Either way, resistance is a price level where available shares outnumber buyers and put a halt to a stock’s move higher. While there are a number of ways to spot key resistance levels, one of the most powerful is also the most obvious: look for past price levels where shares peaked. By placing your mental target price just below resistance, you can often unload shares of a stock before buying starts to languish. A good example happened earlier this week in shares of US Oil Fund (NYSE: USO), an oil ETF that I recommended my Penny Momentum Trader readers unload on Monday. 6 Penny Stocks to Own Right Now… Greg Guenthner, editor of Penny Stock Fortunes is giving away SIX penny stock recommendations to all new subscribers! But you must hurry because these plays could explode at any time. Click here to watch the presentation now. We’d been shooting for a pre-planned trade as shares moved from one area of resistance to another. Here’s a graphical glimpse at how our trade panned out: We bought shares of USO just above $39, as shares cleared a previous resistance level, and unloaded before $42, where they’ve since stalled. That $42 target price came from the previous highs that this ETF hit back in March and April 2010 — so it came as no surprise that the rally has fizzled out since we hit the “sell” button. Ultimately, we ended up banking 27.5% gains on USO options within a single week. That’s a solid move given the limited risk and pre-set price target that we entered the trade under. Obviously, putting resistance-based price targets to work isn’t something that’s easy to implement from the get-go. That said, with practice, careful analysis of the markets could have you pinning strong levels of resistance (and realistic price targets) in 2011. As anxious investors take their toll on the market this month, new and experienced investors alike are facing a challenging environment — that’s why there’s no time better to expand your trading toolbox… Cheers, Jonas Elmerraji Managing Editor, Penny Sleuth P.S.: Even though we unloaded our oil ETF this week, I think that we may have another potential trade coming with this fund — one that could dwarf the 27.5% gains that my readers had the chance to book just last week. To get the full details on my strategy (including my next recommendation for USO), you’ll need to click here… One-Week Options “One-Week Options” That Could Show Up to 1,329% In on Monday. Out by Friday. Every single time. Gains can run to 369%, 545%, 1,329% — maybe even higher. Get the chance to start booking gains like these for yourself — right here. Think Like a Trader to Limit Your Risks and Pocket 28% Weekly Gains is featured at Penny Sleuth. 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