Timing The Markets For Low Risk And Big
Profits
The Dynamic Wealth Report
June 23, 2010
by Justin Bennett, Editor
My wife and I like to get away from the dry heat of the Arizona desert
once in a while. One of our favorite places is the California beaches…
The ocean has an air of peace you can’t find anywhere else. To me, a
wave rolling onto the beach is one of the most relaxing sounds. With the
seagulls chirping overhead and the feel of hot sand beneath my feet,
it’s a small slice of heaven.
But the relaxation comes to an end when I jump in the ocean…
You see, I grew up in the mountains. I’m more familiar with a pair of
snow skis than I am the ocean. Don’t get me wrong… I can swim. But I
won’t be challenging Michael Phelps to a race anytime soon.
Sometimes I run into the ocean, failing to realize just how big and
powerful the waves can be. I usually time my entry into the water at
just the wrong time. My wife says I look like a cat in a washing machine
as the wave washes me back to shore.
Just like swimming in the ocean, timing your entry in the market is a
must…
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Time your entry right and its smooth sailing. Do it wrong and you’ll get
a mouth full of seawater and a load of sand in your ears…
Jumping into a market at the wrong time can result in taking on excess
risk. Seasoned traders control risk by waiting for just the right moment
to enter the market.
If you’re a beginner trader, you might lack two things, patience and
discipline.
When you see a stock surging higher, you want to get in on the
excitement. The feeling of being left behind can overwhelm you. You
don’t have the patience to wait for a better entry. You don’t have the
discipline to move on to better opportunities.
Maybe you were afraid to enter the stock at the correct entry. Maybe you
weren’t following the stock and just happened to see it surging higher.
By missing the correct entry for the stock, you “chase” the market
higher. You end up buying at premium levels. Your plan is “hoping” the
market continues to move higher.
Sometimes this will work, but most of the time you’ll get burned. You
end up buying when the pros are taking their profits. If you don’t know
how to size your positions properly, you can get burned badly… or totally
wiped out.
I can hear you asking…
Well, what if I wait for a better entry and I never get one? Don’t I risk
missing the chance to make huge profits?
Yeah, in this stock you do…
But there are thousands of other better low risk opportunities out
there. The markets are full of them. Just keep looking and you’ll find
plenty. Don’t feel as though this is your last opportunity to profit.
Warren Buffett is famous for the saying, “In this game the market has to
keep pitching, but you don’t have to swing. You can stand there with
your bat on your shoulder for six months until you get a fat pitch.”
If you missed the correct entry in commodity or some stock you
absolutely have to be in, you have two options:
- You can “chase” the trade. But you must accept the fact that the
dollar risk of your entry is much higher. You must adjust your position
size to this higher risk. (But I don’t recommend this.)
- Wait for the correct (low risk) entry. Usually stocks see a pullback. Maybe it’s another test of a support line.
By being diligent and watching the markets for low risk opportunities,
you can still make nice profits… even in these turbulent markets.
Trust me: Don’t run head first into a wave and get your ears packed with
sand!
• Sugar (Over $0.16 a pound)
Sugar is strengthening in recent trading action. Physical demand for
sugar remains strong as Brazil is currently harvesting their sugar crop. While Brazil is expecting a strong crop this year, export demand may
keep the sugar market tight.
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