|
If you have lost money trading stocks on local exchanges then trading on
the US stock market might be the last thing on your mind. But Mirriam
MacWilliams, a professional trader and director of education at the
14,000-strong US Investor’s Club, reckons everyone is capable of making
money on the US stock market, if they have the right education and
tools.
Q: The US stock market has been on a downward trend recently, so how can
investors make money?
Mirriam MacWilliams: The stock market reflects changing prices in
certain stocks or indexes, whether because of changing economic
conditions or company fundamentals. Most people buy stocks and expect
their value to go up, so they see a stock that is going downwards and
think it’s a good opportunity to buy, but there are opportunities to
make money regardless of whether the market is moving up or down.
The average US bull market can last for several years, whereas the
average bear market usually lasts for seven or eight months, so most
people think they can ride out a ‘draw down’ from their account in the
belief that their stocks will go back up. Clearly this is not a safe
investing strategy. There are times when companies experience poor
management decisions or change business models, and that can take away
from a company’s stock price, so stocks may not return to the levels at
which they were trading previously.
Q: Why trade on the US stock market, and how is it different from the local
stock market?
MM: The US stock market has the capacity to make significant money for
the average person. An individual can choose to trade stocks that have
small percentage moves or larger percentage moves, depending on their
risk tolerance and trading skill. You can choose to be in a trade for a
few days or a few months and be extremely profitable.
As a rule, strong stocks will get stronger and weak stocks will get
weaker, and there is money to be made on these stocks if you use the
right trading ‘rules’. Those rules should be simple, profitable and
consistently accurate, so that’s what I strive to teach.
Q: What do you mean by simple, profitable and consistently accurate?
MM: Rules must be easy to follow, and it should not take too much time
for the average person to master the strategy and grasp the concept
behind it. Most importantly, that person must be able to apply that
strategy practically, step by step, knowing before the trade is executed
what type of profits can be expected, as well as how to manage their
money by reducing risk and increasing returns. After that, investors
also want to know that a trade will be profitable within a day or so, so
the strategy can be repeated over and over again with the same great
returns.
Most people let other people, like brokers or mutual fund managers
manage their money for them. Learn to do it for yourself. Remember, no
one cares about your money as much as you do.
Q:
So what is the key to successful trading?
MM: There is no substitute for proper money-management techniques.
First, it is critical to be able to determine what your potential profit
target is and what your potential downside is on every position, since
it helps us determine whether the risk on that particular trade is worth
the reward. A position may look very enticing because of the upside
potential, but after we have done our homework, however, we find the
downside risk will outweigh the profit potential. We can now choose to
pass on that position.
Second, knowing precisely where to place ‘stop losses’ on every position
protects our investment capital. People generally do not place stop
losses and, if they do, they do not place them at accurate levels. Once
you know where to place your stop loss, you will be very confident that
you have taken the proper steps towards the preservation of your
capital, and that is the key to a successful trade.
Q: What are the software, tools and education one needs to trade
successfully?
MM: Every professional needs tools, and traders are no exception. We
need to have the capacity to get real-time quotes for the broader market
as well as the stocks and indexes that we intend to trade. We also need
to measure the bottom line numbers behind a company. In the US, a
company reports its performance to the Securities and Exchange
Commission (SEC) every three months and this information is then made
available to the public. We need to measure a stock’s performance over
the last year, looking at earnings and revenues. We need to compare its
activities to the S&P 500 index and we would like to know that insiders
within a company are purchasing their very own stock, or at the very
least not selling the stock in high quantities. This information is
known as the company’s fundamentals and I can show anyone how to do this
easily in a matter seconds. They don’t even have to be a fundamental
analyst.
We also need to monitor the stock’s action over a period of time, which
is known as technical analysis. We can use technical analysis to help us
determine when to buy and when to sell a stock, otherwise we could be
buying a perfectly good stock at just the wrong time.
Technical analysis enables us to stack the probability of success on our
side by allowing us to trade stocks going in the direction of the market
(whether up or down) using price action and simple indicators.
Most people use technical analysis to forecast or predict the future,
and that is why they lose money. I use technical analysis to interpret
the data and help me make wise investment decisions and consistent
profits. Anyone can do this quite simply. You don’t have to be a
technical analyst, you just have to be able to understand to correctly
interpret the data.
Paper trading is a wonderful way of fine-tuning a strategy. It allows
you to see whether a strategy suits your trading personality and builds
an enormous amount of confidence. No trader should begin trading real
money without first experiencing paper trading.
Q: What is price action?
MM: Price action is about where a stock closes relative to where it
opened. Was there buying or selling interest in the stock and, if so, at
what price? Price action is the most significant piece of information
you can start with when considering whether or not to trade or invest in
the US market. If you are looking to buy the very stock that the smart
money is looking to sell, then your buying decision is not a wise
investment and not likely to be profitable from the outset.
Q: What is one simple indicator that you use?
MM: A simple indicator would be the moving averages that compile the
closing prices of the stocks over a given time. As long as the stock
stays above this average, the stock is exhibiting strength. If the stock
is trading below this key moving average, then the stock is exhibiting
weakness. Strong stocks get stronger, weak stocks get weaker.
Q: What drives you to teach others to trade successfully?
MM: I personally invested over US$32,000 in tapes, videos, airfares,
seminars, books and tapes in order to learn how to trade, and it got to
the point where there was no more I could do, but I still did not feel I
was comfortable making trading decisions on my own. I want to spare
others from these disappointments. I knew I wanted to trade full time
and trading has changed my life. I meet people from all walks of life
and I want to change the lives of others. If I can be successful trading
in the US stock market, I know anyone else can. All that is needed are
the right tools and the proper education.
Q: Why are your trading strategies different from others?
MM: I do not like to simply teach people trading philosophies. I am also
not a believer in too much technical information. Trading should be kept
simple, doing what the fund managers are doing. When they are selling, I
want to be selling and vice versa. I focus on how to make money with
precise entry and exit strategies that are consistently accurate, which
is very different from others who simply focus on strategies that work
for a while and then stop working altogether.
So how can an average person get an unfair advantage trading in the US
stock market?
MM: You need to have an indication of how a stock is going to behave
before you execute a trade. For example, knowing that the stock can go
up or down by between three and five points, then positioning yourself
in this direction is critical to getting an edge in the US stock market.
That is why understanding price action will definitely give you an
unfair advantage.
Q: What advice can you give to people who are contemplating becoming a
professional trader or learning to trade, whether full-time or
part-time?
MM: My first recommendation is to determine how much time you are
willing to devote to trading in the stock market, since that will
determine what type of trading personality you will have. I find there
are two types of individuals: there are investors and there are traders.
An investor likes to have nice returns on their portfolio, but they
might not have much time to devote to the stock market. They may even
have a full time job. In this instance, investing is the perfect vehicle
for this individual since it requires little time – around 20 minutes or
so prior to the market opening.
Most people use technical analysis to forecast or predict the future,
and that is why they lose money.
A trader, on the other hand, does have time to invest in the stock
market and so looks
to take advantage of the daily fluctuations in the stock prices. This
can be very profitable, but the trader needs to monitor the market’s
intra-day movements at certain times.
I highly recommend getting the proper trading education, and I believe
that students should paper trade, or simulate real-life trading. This is
a wonderful way of fine-tuning a strategy and it also allows you to see
whether a strategy suits your trading personality. Lastly, paper trading
builds an enormous amount of confidence. When you see how quickly your
trading accounts grow on paper, you will be better prepared to become a
successful full-time trader. No trader should begin trading real money
without first experiencing paper trading.
You can learn more about
Mirriam MacWilliams and her million-dollar trading
strategies
at our 2-hour content-rich free seminar.
Register with
Wealth Mentors at www.Wealth-Mentors.com
 |
