Quote:

Weinstein's method is brilliant, but it's just the beginning...

Whilst it is a most important start to any trade entry, of itself, identifying the stage alone is just not comprehensive enough to allow one to become a proficient trader – whether of stocks, commodities or forex.

More information and expertize is needed. That is not because there is any fault with the identifying the stages as an initial approach – far from it – stage analysis, as set out by Stan Weinstein, is probably (in my experience, definitely) the most common sensical and helpful approach to deciding when to invest and what in.

Stage Analysis is a game changer and, by using it, it sets one apart from those who guess or who listen to the financial news for their means of making a choice of what to trade.

Have you bought one of the many get-rich-quick ”trading secrets” schemes? I know that I did in my early trading days. There are just so many of them - “learn the 7 secrets of successful investing” or “trading secrets of a multi-millionaire trader” etc., etc.

But, you know what, there are no secrets to successful trading; you simply need to identify and use the right tools and put in the effort to learn how to trade profitably.

And the first tool is, definitely, Weinstein’s Stage Analysis, so you have got off on the right foot. But you will need more if you are to be successful.

The additional tools that I have found to work, and work well, can be listed as follows:

• Identification of resistance price levels for each item under consideration: Even though an item may have swung into a ‘stage 2’ Uptrend as its new trend doesn’t mean that it is going to go the way you want. It will react to identifiable resistance levels, so you should wait until such levels have been overcome.
  
  
• Learn how to relate volume information to the corresponding price movements: Increased volume is increased supply (selling), but has the buying demand increased as well or is it static or reducing (so the trend may revert back to ‘stage 1’ or worse)?
  
  
• Relative Strength: There is no point in plumping for an item that is going to move slowly if there are others that are likely to rush ahead (and that is all to do with learning how such things as “5th attempts” and “virgin territory” and “support levels” work.
  
  
• Strict money management rules: always only risk a small percentage of your capital in each trade and never be tempted to increase it.
  
  
• Profit-protection adherence: Most traders will look for the profit run and will take their profits too early; often they will then let their losing trades run on and get bigger. They don’t hang around for very long as they are soon taken out of the game having lost all of their capital. Set your target price and stick to it and bank you profits when it is hit.
  
  
• Stop-loss price system: Vitally important! You will make good money over an extended trading lifetime if you watch and manage your losing trades (just ignore your winning trades – they will look after themselves). It is by minimising your risk of loss that you will end up rich and happy. Believe me, it works. Set your initial stop-loss (within your money management parameters) and then move it up (or down if you are trading short) as the price movement allows. It is an art rather than a science as you must allow sufficient room for the normal up and down movement of the price as you do not want to be taken out of the trade too soon.
  

All these elements are included in the ShareHunter ‘Alerts’ service and I am happy for our subscribers to use and to learn them so that they may evolve into successful traders who, like me, have an awful lot to be grateful to Stan Weinstein for.

Alan Saunders
Chief Analyst, ShareHunter.com
October 2013