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Deron Wagner is the founder and portfolio manager of Morpheus Trading Group. His daily focus is managing and trading the Morpheus Capital Hedge Fund, which he founded in April of 2004. He also teaches his swing trading strategy with The Wagner Daily newsletter, which provides exact entry, exit,... More
My company:
Morpheus Trading Group
My blog:
Morpheus Trading Group - swing trading blog
My book:
Advanced Technical Analysis of ETFs
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  • Our 13 Best Stock Trading Strategy Articles Of 2013

    In 2013, we proudly posted 117 articles here on our blog that consisted of ETF and stock picks, technical analysis of the markets, and educational articles related to our proven swing trading system.

    As another fantastic year draws to a close, we are highlighting our 13 best trading strategy articles of the year.

    The following list is quite handy if you just discovered our blog mid-year, or even if you simply would like to review our top blog posts of the year. Enjoy!

    13 Top Trading Tips of 2013

    In no particular order, here we go...

    1.) Top 5 Qualities Of The Best Stock Breakouts

    Not all stock breakouts are created equal. While the best will zoom 20-30% higher (or more) before taking a rest, others quickly fail and fall back down below the breakout level.

    For maximum odds of a successful breakout, you need a checklist to make sure you're not overlooking a key technical point. Here is our list of the top 5 qualities to look for when trading breakouts.

    2.) How To Trail Stops On Winning Swing Trades For Maximum Profit

    One of the most challenging aspects of swing trading is knowing when to exit a trade...specifically a winning trade.

    Locking in your trading profits too soon (due to fear of a reversal) has a very high opportunity cost and can make it difficult to be a consistently winning trader over the long-term.

    Conversely, being greedy by trying to squeeze every point out of the trade before selling is a surefire way to give back a substantial amount of unrealized gains.

    The answer to this dilemma is scaling out of a trade by trailing stops higher along the way. Here is a clear explanation of how we do it.

    3.) How To Trade Around Earnings Reports With Maximum Profits And Low Risk

    When public companies report their quarterly earnings four times a year, many traders are unsure whether to exit their positions ahead of the expected earnings release date or to simply continue holding onto their trades.

    Closing out a trade ahead of earnings can prevent the realization of large gains that come with positive reactions to earnings reports, but it also eliminates the risk of getting nailed if a stock drops due to a negative reaction.

    Our trading methodology seeks to capture the best of both worlds. Click here to read the article.

    4.) How To Find The Best Stocks To Buy BEFORE They Breakout

    The best breakout stocks always emerge from a valid base of consolidation that consists of one of two types: cup and handle or flat base.

    In this article, learn to identify both types of basing patterns to ensure the stocks you are buying are valid breakout candidates.

    5.) How Monstrous Volume Powered This Breakout Stock To Our 37% Gain

    Volume is one the most powerful, albeit basic, technical indicators at a trader's disposal. Yet, many newer traders underestimate the effectiveness and efficiency of identifying volume surges that point to buying among banks, mutual funds, hedge funds, and other institutions.

    Earlier this year, we bought and sold Bitauto ($BITA) for a 37% share price gain, and volume was one of the key factors that told us to hang on to this stock.

    Here is our educational review of that winning trade, with a focus on how studying volume patterns can increase your trading profits.

    6.) How Top Stock Traders Mentally Deal With Sudden Market Reversals

    Regardless of how much we plan and prepare each new trade entry, things don't always work out as anticipated (otherwise we would all be gazillionaires).

    As such, it is crucial to always have a game plan for how to emotionally and physically handle unexpected changes in a stock's price action. Check out how we do it.

    7.) How We Traded The Breakout In Silica Stock For A 43% Gain ($SLCA)

    After buying and holding shares of US Silica ($SLCA) for three months, we sold the stock in October for an average share price gain of 43%.

    Using six annotated stock charts, we walk you through the anatomy of a successful breakout trade.

    After reading this article, you will discover that a consistently winning system for trading breakouts does NOT need to be complex.

    8.) How To Buy The Best Breakout Stocks On A Pullback

    In a healthy bull market (all of 2013), a majority of the stocks and ETFs we buy are momentum-based breakout trades.

    However, when leading stocks are breaking out like mad, it's easy to miss the occasional breakout that you were stalking for potential buy entry.

    When this happens, there is no need to feel you've missed out on the opportunity. Simply buy the first short-term pullback instead.

    We raked in large profits with pullback trading in numerous instances this year. Read this article for references to several specific examples of how we did it.

    9.) 4 Winning Tips For Profitable ETF Trading

    In our nightly swing trading newsletter, we trade both individual stocks and ETFs, the ratio of which is dependent on market conditions.

    After locking in a 44% gain on shares of Guggenheim Solar ETF ($TAN) earlier this year, we detailed 4 specific tips that helped us identify this ETF as a great trade candidate.

    Find out about these same four traits we generally look for with most ETF swing trade setups.

    10.) How To Avoid The Biggest Mistake Traders Make In A Bull Market

    With the benchmark S&P 500 on track to gain about 30% in 2013, it's easy to assume everyone trading the markets this year is raking in the donuts.

    Unfortunately, this simply is not the case because too many traders and investors fall victim to one of the biggest mistakes (hint: not all stocks go up in bull markets).

    Cruise through this article to find out if you're guilty of the same mistake, and how to fix the problem if you are.

    11.) If You're Seeking The Holy Grail Of Trading, Stop Wasting Your Time!

    Have you ever found yourself continually switching from one trading strategy to another, or one trading instrument to another, in hopes of finally striking gold by "getting it?"

    If so, you may be guilty of seeking the (non-existent) "Holy Grail" of trading. Find out if you are headed down the wrong path and how to correct the situation if you are.

    12.) How Winning In The Stock Market Boils Down To Simple Math

    When I was a new trader, I was under the (false) impression that consistently profitable trading could only be attained by having an extremely high win rate (percentage of winning trades versus losing trades). As such, I constantly found myself unnecessarily complicating my stock trading efforts.

    But when I eventually realized that winning traders only need to work a small mathematical edge in their favor, my trading account began growing at a rapid pace, while my personal stress level began decreasing at the same time.

    In this article, learn why perhaps the single most important element of winning in the stock market is simply making sure the math is on your side.

    13.) Overview Of Our Simple Stock Trading Strategy

    Our rule-based swing trading system consists of buying Breakouts (3 different types), Pullbacks, and Trend Reversals of leading stocks and ETFs with the top relative strength.

    In this comprehensive article, see detailed, illustrated examples of each trade type, along with a few of our rules on often overlooked issues such as money management.

    Originally a blog post, we moved this all-important article to the "Strategy" page of our main web site. Don't miss it!

    Honorable Mention

    There is one more piece that I really wanted to include on our list of 13 trading strategy tips, but I did not include because the article was actually related to a specific period of broad market analysis.

    On September 6, when many traders were still expecting further downside follow-through from a prior correction, we wrote about the Top 3 Reasons Why The NASDAQ Will Soon Breakout To A New High.

    One day later, the NASDAQ indeed broke out to a new high and never looked back for the rest of the year. This prompted us to remain bullish on stocks throughout the fourth quarter, which has paid off rather nicely.

    Even though it was originally a time-sensitive article, there is a lot of educational value in learning the specific elements we saw that enabled us to accurately anticipate further gains in the NASDAQ.

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    Original Article Source DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Morpheus Trading, LLC (hereinafter "The Company") is not a licensed broker, broker-dealer, market maker, investment banker, investment advisor, analyst or underwriter. This discussion contains forward-looking statements that involve risks and uncertainties. A stock's actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by The Company. Please consult a broker or financial planner before purchasing or selling any securities discussed in The Wagner Daily (hereinafter "The Newsletter"). The Company has not been compensated by any of the companies listed herein, or by their affiliates, agents, officers or employees for the preparation and distribution of any materials in The Newsletter. The Company and/or its affiliates, officers, directors and employees may or may not buy, sell or have positions in the securities discussed in The Newsletter and may profit in the event the shares of the companies discussed in The Newsletter rise or fall in value. Past performance never guarantees future results.

    © 2002-2013 Morpheus Trading, LLC
    Reproduction without permission is strictly prohibited.

    Dec 30 2:41 PM | Link | Comment!
  • Expecting A Santa Claus Rally? Here Are A Few Potential Breakout Stocks To Buy

    As we approach Christmas Day, many traders and investors are anticipating a "Santa Claus rally" in the stock market...and with good reason.

    According to a recent Forbes article, the S&P 500 has scored a December gain in 17 of the past 20 years.

    The Dow Jones has done so in 65 of the past 100 years.

    Although it obviously does not happen every year, the stock market undeniably has a history of positive returns in (the latter half of) December.

    As technical momentum traders, we never place much weight purely in seasonal market trends because we focus on the performance of leading stocks and broad market volume patterns instead.

    Nevertheless, be sure to check out this new stock pick video that uses our online stock screener to show you a few potential breakout stocks to buy in the coming days ($DDD, $QTWW, $THRM, and $IQNT).

    View the new 3-minute video on our blog by clicking here now.

    Follow Us: Follow us on Google+ Follow us on Twitter Join us on Facebook Our trading blog - RSS feed

    Original Source

    DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Morpheus Trading, LLC (hereinafter "The Company") is not a licensed broker, broker-dealer, market maker, investment banker, investment advisor, analyst or underwriter. This discussion contains forward-looking statements that involve risks and uncertainties. A stock's actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by The Company. Please consult a broker or financial planner before purchasing or selling any securities discussed in The Wagner Daily (hereinafter "The Newsletter"). The Company has not been compensated by any of the companies listed herein, or by their affiliates, agents, officers or employees for the preparation and distribution of any materials in The Newsletter. The Company and/or its affiliates, officers, directors and employees may or may not buy, sell or have positions in the securities discussed in The Newsletter and may profit in the event the shares of the companies discussed in The Newsletter rise or fall in value. Past performance never guarantees future results.

    © 2002-2013 Morpheus Trading, LLC
    Reproduction without permission is strictly prohibited.

    Dec 19 4:46 AM | Link | Comment!
  • How Winning In The Stock Market Boils Down To Simple Math

    What percentage of the time do you think a trader needs to have winning trades in order to be consistently profitable over the long-term? 60%? 70%? 80%?

    What if I told you that some of the best equities traders I know have a win rate of only 50%, and some very successful swing and position traders even have a batting average as low as 40%?

    If you're brand new to stock trading, you understandably may find this hard to believe, but I assure you it's reality. Read on to learn why...

    Naive Newbie TradersNaivety Of A Newbie

    As a newbie stock trader in the late 1990's, I was convinced one needed to have a win rate of at least 70-80% in order to make a successful living trading the stock market.

    Damn, was I wrong!

    On the contrary, such a high percentage of winning trades is not at all necessary in order to rake in trading profits year after year.

    But wait, you say. How can a trader or investor who is only netting a gain on 4, 5, or 6 out of every 10 trades still come out a consistent winner in the end?

    The answer simply comes down to understanding that...

    Profitable Trading Is Only A Numbers Game

    To bring home the bacon as a trader, one only needs to ensure that the average gains of one's winning trades are substantially larger than the average losses of one's losing trades. Check it out...

    Assume a trader buys and sells 10 different stocks and the outcome is as follows:

    • 5 winning trades closed with an average gain of $400 each = +$2,000 gain (5 * $400)
    • 5 losing trades closed with an average loss of $200 each = $1,000 loss (5 * -$200)

    What is the net result of those 10 roundtrip trades with "only" a 50% win rate? A cool net gain of $1,000 (you don't even need to be a mathematician).

    It makes sense, right? It also makes a lot of dollars (sorry, can't refuse the occasional pun).

    Superstar Stock Pickers Not Required

    When I eventually realized that consistently profitable trading is merely a numbers game that requires a slight mathematical edge (much like card counting in blackjack), it was fantastic news for me!

    It meant that I did not have to be a superstar stock picker, or even a really good one, in order to be a stock market winner.

    Super Stock Picker

    Rather, I only needed to develop a trading system that ensured my average winning trades were significantly larger than my average losing trades.

    Over the past 11 years that I have been tracking and reporting the performance of every single stock and ETF swing trade in my Wagner Daily newsletter, my average win rate has only been around 55 to 60%.

    However, the dollar amount of my average winning trade to average losing trade has been roughly 2 to 1.

    In a strongly trending market, the ratio of average winner to average loser is even much higher.

    For example, my stock trading win/loss ratio so far in Q4 of 2013 is 3.48 to 1 (details right here).

    The great news is that making sure your winning trades are larger than your losing trades is easier than one might assume.

    How To Tilt The Edge In Your Favor

    Ensuring the necessary mathematical edge for consistently profitable trading only requires the discipline to do three things consistently.

    1.) Stay With The Trend Until It's No Longer Your Friend

    When you are holding a trade that is steadily moving in your favor, it is absolutely imperative to let those profits ride as long as the stock or ETF maintains that trend!

    In healthy markets, leadership stocks (usually small to mid-cap stocks with strong earnings growth and high relative strength) are driven by the huge momentum and demand of institutional buying.

    After a stock breaks out of a valid base of consolidation and enters into a steady trend, that trend typically remains intact for many months, or even years.

    Furthermore, the longer a trend has been in place, the more likely that trend is to continue.

    That's why strong stocks trading at new highs are so often seemingly unstoppable.

    Spend some time cruising around this blog and you will see many real examples of actual trades where this was the case (you're bound to learn a thing or two as well).

    2.) Know When To Get The Hell Outta Dodge...Without Hesitation!

    The second requirement to tilting the trading edge in your favor is to always, without fail, place a predefined protective stop loss immediately after entering each and every new trade.

    No matter how bullish a stock chart looks, or how many i-whatever devices a company is expected to sell, or how much your best friend's wife's brother insists a stock will rally because of his hot "inside tip," there will be countless times when the stock plunges of a cliff instead (and remember the actual reason for the price reversal is always completely irrelevant).

    Get Outta Dodge!

    But when you know you have already set your predefined stop loss order immediately after entering the trade, you've got nothing to worry about (although the occasional, surprise opening gap from an unpredictable news event sometimes sucks).

    On the contrary, you should be pleased every time a stock falls to your stop price and you exit the trade with a loss.

    Why? Because it means you are maintaining the required discipline to become a consistently successful trader over the long-term.

    On the other hand, failing to quickly cut your loss when a trade starts moving too far in the wrong direction inevitably results in pain, heartache, and (if you don't get your discipline under control) eventually an empty bank account.

    Have you ever stayed in a bad romantic relationship too long, rather than simply cutting your losses and moving on?

    I have, and (in hindsight) I can assure you that nothing good ever comes out of such a situation. The same is true in trading.

    3.) Ensure The Positive Edge With Proper Stop Placement

    You now understand the importance of letting momentum work in your favor with winning trades, and the need for getting out quickly when the situation reverses, but the glue holding these two elements together is knowing where to set your initial stop loss price when entering a trade.

    Not surprisingly, there are a plethora of technical indicators to assist traders in knowing precisely where to set stop losses.

    One method is to set a stop loss just below technical support of a popular moving average (the 20 and 50-day moving averages work well for short to intermediate-term swing trading).

    On uptrending stocks, a stop can also be placed just below the prior "swing low" that often creates an anchor point of a trendline.

    I personally use both of these techniques because they are simple, yet highly effective.

    Nevertheless, I could write an entire chapter of a book dedicated to knowing where to set your stop loss prices (I already have). I could even design an entire stock trading video course with nearly a full hour just on the topic of when to exit your trades (I've done that as well).

    The "Quick And Dirty" Method For Setting Stops

    Even if you know absolutely nothing about technical analysis, and barely know how to read a stock chart, here's a great guideline for setting stops that will keep you and your trading account out of harm's way.

    Setting Stop Losses

    For the types of stocks I trade (higher volatility than old school Dow-type stocks), one can simply set a stop price that is no more than 7-8% below the entry price.

    If, for example, the stock price is $50 at the time of entry, an 8% stop would equate to a stop loss price no lower than $46 ($50 * 8% = $4 stop).

    For extremely high beta stocks ($TSLA is a good example), I use a wider stop. For most ETFs, on the other hand, I use tighter stops because many (but not all) of them have lower volatility.

    How do I know that 7-8% is the right ballpark figure for most stops on the stocks I trade?

    Well, that brings me full circle back to the beginning of this article.

    I only need to make sure that the percentage gain of my winning trades is expected to be at least twice the percentage loss of my losing trades.

    This is known as a reward-risk ratio, and the minimum ratio I always aim to achieve is 2 to 1.

    This means my expected potential reward (the amount I will gain on the trade if it hits the area of my target) should be at least double my risk (the amount I will lose if the trade hits my goes the wrong way and hits my stop).

    Since most momentum-based stock breakouts rally at least 15-20% (sometimes much higher) before stalling or taking a rest, using a stop price level of 7-8% leaves me with a typical reward-risk ratio of 2 to 1.

    Get it? Got it? Good.

    If you're still with me at this point of the article, congratulations because it means you are serious about improving your trader education to succeed as a momentum swing trader or investor.

    Trying to count the number of mistakes I made when I was a new trader would surely give me a headache. Even now, occasional mistakes are unavoidable.

    But in my heart, I truly believe you can screw up a lot of things in trading, yet still be net profitable when the dust settles IF you simply focus on always putting the mathematical edge in your favor.

    If this article inspired you or gave you some good for thought, please drop me a comment below. As always, sharing with your favorite social network is also appreciated.

    Since 2002, our swing trading service has helped thousands of traders increase their trading profits, while learning "no nonsense" trading methods that work. Sign up for your 30-day risk-free subscription today.

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    Original Article Source

    DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Morpheus Trading, LLC (hereinafter "The Company") is not a licensed broker, broker-dealer, market maker, investment banker, investment advisor, analyst or underwriter. This discussion contains forward-looking statements that involve risks and uncertainties. A stock's actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by The Company. Please consult a broker or financial planner before purchasing or selling any securities discussed in The Wagner Daily (hereinafter "The Newsletter"). The Company has not been compensated by any of the companies listed herein, or by their affiliates, agents, officers or employees for the preparation and distribution of any materials in The Newsletter. The Company and/or its affiliates, officers, directors and employees may or may not buy, sell or have positions in the securities discussed in The Newsletter and may profit in the event the shares of the companies discussed in The Newsletter rise or fall in value. Past performance never guarantees future results.

    © 2002-2013 Morpheus Trading, LLC
    Reproduction without permission is strictly prohibited.

    Nov 20 1:08 PM | Link | Comment!
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