LESSONS FOR STOCK MARKET
How do you determine the direction of the stock
What makes a successful trader?
 10% winning system (when to enter and exit
the market)
 30% position sizing (risk management, # of
shares)
 60% psychology (motivation, discipline, focus,
determination)
How do you Profit from Stocks?
 going long: buy low and sell high (bullish=stock
will go up) * upward trend*
 going short: sell high and buy low
(bearish=stock will go down/burrowing a share
at high price then buying it at low price)
*downward trend*
 using leverage to magnify return of investment
o margin acc allows to take a position w
50% margin (US citizen) – buy 1000
shares for 500
o CFD (contract for difference) allows us
to take a position with 10% margin (non
US citizen) – buy 1000 shares for 100
price?
Fundamental Analysis (for medium to long term
investor)
 studying if the company is in good condition
through sales, earnings growth, debt
o high growth, high valuation= share price
increase = go long
o low growth, low valuation= share price
decrease= go short
Technical Analysis (for short term investor)
 studying the emotional patterns that drives the
stock price not by logic/fundamentals but by
emotions of fear and greed
o price trends
o candlestick patterns
 uptrend
 consolidation (horizontal line)
 downtrend
o supply and demand (support & resistance)
Price on an Uptrend
 price makes higher highs and higher lows
 uptrend (bullish)= always go long and buy
during the dip/Corrective wave (wave opposite
of the trend direction)
 I- impulsive wave (wave in the direction of the
trend
 different stocks tend to respect 3 major moving
average in different time frames (act as level of
defense)
o 50,150,200
LESSONS FOR STOCK MARKET

 Price is moving sideways (same highs same

lows and keeps hitting a resistance when the
stock goes upwards and hits the support
when the stock goes downwards
 always buy at support and sell at resistance

 whenever price gets very near or bounces off

the moving average, that is the optimal time to
buy

 price in a consolidation can either breakout into

a new uptrend or downtrend when it breaks the
resistance or the support
 if the price breaks the resistance, BUY

Price on a Downtrend

 Investors can buy a stock either on the first

breakout of a consolidation or wait for the price
to come back to the resistance which in turn
becomes the support then the stock goes up
again(retracement trader)

 Go short
 always sell the high/rallies of the downtrend

Different Types of Investors/Traders

Position Trading

Price on a Consolidation  weekly and day candles

 duration: months – years
LESSONS FOR STOCK MARKET

 Focus on Fundamentals Position size= $90 x 33= $2,970

 Weekly or quarterly review
Winning trade= $6 x 33 shares= $198 4% return on
 no leverage w low intensity
capital
Swing Trading
Losing trade= $3 x 33 shares= $99 2% loss of capital
 day candles
 duration: <2 weeks
 30 mins-1 hr a day before market opens
 leverage w low intensity
Day Trading
 1-5 min candles
 duration: <24 hrs
 constant monitoring when market is open
 high leverage high intensity
Scalping
 1 minute candles
 duration: <120 sec
 monitor 30 mins when market open
 high leverage, high intensity
Trading System
Trend Following
1. Moving Average Bounce System
 Best used when market is in strong uptrend or
downtrend.
2. Impulse Pullback System
 when stocks starts a new uptrend, wait for a
minor pullback to catch the trend
3. Breakout System
 when a stock breaks out or down
4. Gap Up News Scalp
Mean Reversion
1. Bollinger Mean Reversion
2. Capitulation System
3. Trading the Range System
FUNDAMENTAL ANALYSIS
 Earnings per share =shows how much
a company earns for each share,
o good” EPS should be a positive figure that has
a long track record of consistent growth.
Capital $ 5,000  Return on Equity/value = indicates
how well a company's management uses
Risk per trade R = 2% shareholder capital
o ROE of 15-20% good
Shares to buy= $5,000 x 2% = $100 (total risk of
trade/max loss) /$3 (price per share) = 33 shares
LESSONS FOR STOCK MARKET

 Price to Book Value = measures whether or not a  Williams% R(14)

company’s stock price is undervalued.  VolumeSMA(15)
o any value under 1.0 is considered a good P/B  CandleStick(1)
value (undervalued stock)
 Dividends Per Share = total amount of dividends
attributed to each individual share outstanding of
a company
o a range of 5% to 55%
 Price Earnings Ratio = determine the market value
of stock compared to the company’s earnings.
o low P/E: stock price is low comparative to
earnings.
o High P/E: Stock price is high comparative to
earnings (overvalued)
o consistently negative P/E ratio run the risk of
bankruptcy.
o CHEAP P/E: Below 15
o EXPENSIVE P/E: Above 18

TECHNICAL ANALYSIS
 Moving Average= identify the trend location of a
stock or to determine its support and resistance
levels.
o Most common time periods used in
moving averages are 15, 20, 30, 50, 100,
and 200 days. The shorter the time span
used to create the average, the more
sensitive it will be to price changes

INDICATORS
 Relative Strength Index= measures the speed
and change of price movements
o low RSI levels, below 30 (red line), indicate
oversold conditions—generating a
potential buy signal. Conversely, high
RSI levels, above 70 (green line), indicate
overbought conditions—generating a
potential sell signal.
 Moving Average Convergence Divergence=
used to identify moving averages that are
indicating a new trend, whether it's bullish or
bearish.

 MACD (12,26,9)
 ATR (14)
 CCI (20)
 STS (14,3,3)