However, today I thought I would post a general stock prediction for where I believe the DOW will close for this year.

My prediction probably won’t be all that exciting, because I don’t believe we are going to get out of this range-bound trading environment that we’re by years end (barring some type of big news or event).  We seem to be watching the market rally for a week or two, then come back down.

I suspect that we will continue to see a similar pattern for the rest of the year.  Recently I’ve been buying an ETF that tracks the DOW when it dips to 10,000 or below, and then buying an ETF that is short the DOW when it climbs to 10,700.  It’s been a decent strategy so far and I’ve made a good profit from it.

I would suspect that we see the DOW close at 10,200 to close the year.

And I didn’t do too badly when I did.  I was able to scratch out a profit, but eventually I didn’t keep up with it.

The reason was that I simply found it to be too time consuming.  It’s a market that always moves, 24 hours a day, so I would constantly be thinking about, monitoring and adjusting my positions.  For me, it was a little too much and combined with my activities in the stock market I decided I was best just to focus on equities.

However, I can understand why people like to get involved with currency trading.  It’s fast paced, exciting and for people who like technical analysis can actually do quite well.

I did actually build a model that was based off of technical indicators which was where I made most of my money.  This was a neat way of doing things as once it was programmed, I simply waited for it to tell me when a buy or sell signal was generated and automatically gave me a stop and take profit figure.  It was fairly “hands-off”, although it did still leave me monitoring the markets around the clock.

I actually think people can make great money trading forex if the have the right mindset.  For myself I simply preferred to stick with stocks.

Some people will builds models like I did, or purchase “forex robots”, which basically look for buy/sell signals for you.  If you find a successful model than it’s a nice way to make a profit.  HEre’s sn example of a website that talks about forex trading programs.

Let me know if you have any questions!

Just leave a comment below with your pick.  It would also be great if you left some comment on why you like (or dislike if you’re going short) the stock so that we understand your reasoning.

Of course, if you have a play that’s based on a sector instead of a specific stock, let us know as well!

Thanks everyone and I look forward to hearing from all your money-makers out there!

PS – Your comment may not appear right away as I have to maually approve them all to avoid spammers from leaving comments, but I will get to them soon!

The person who asked me know that I believe in simplicity and I believe that is why they asked.  After all, you can’t get much simpler than buying a stock and then holding it without thinking about it!

And to a certain extent, I do buy and hold – however my timeframe is not always very long.

I don’t day trade.  I’ve tried it and I really didn’t have the discipline or the mindset to make it work for me as well as if I took longer term views.

Sure, I may do an occasional trade that I get in and out of quickly, but they are fairly rare.

Recently I have found myself buying and holding for anywhere for a week to a month.  The market does seem to going through some short term waves and I have been looking at a number of indicators to try to time them.

I still believe we’re in a period where when a sell-off occurs, panic ensues too easily.  This can lead to an extended selloff.

The opposite is also true – once we get some optimism in the market, it seems to “ride the wave” for a bit, sometimes even with negative dats coming out.

I know that eventually I will return to a more classic buy and hold strategy (and I do still have some long-term plays right now).  Right now I firmly believe that market psychology is the biggest “market mover” right now which has changed my strategy for the time being.

For a much more detailed (and better!) description, you can go to : http://en.wikipedia.org/wiki/Technical_analysis

I’ve actually read a fair number of books and studies about technical analysis, but I do have a limited use for it when it comes to making money in the stock market.

People who use technical analysis, often  referred to as “Chartists”, believe that patterns can be recognized in charts that then present them with profitable trading ideas.

There will also make use of a number of indicators such as moving averages, the relative strength index or Bollinger bands.  My goal here isn’t to go through each indicator and pattern they look for, however these indicators are typically calculations that examine price action and volume.

I truly believe there is a place for technical analysis and a couple of the most successful traders I know make use of this method.  However, these traders focus their efforts more on the foreign exchange markets.  They don’t use it as much to make money stock market.

The problem with technical analysis is that it takes A LOT of research and practice to be “good” at it.  The traders I know that use it have logged thousands of hours perfecting their craft.  It’s not something that you can read a quick book about and then have it mastered.

And unfortunately, for the average trader the practice you need with it will usually end up costing you money as you trade based off of it.

As you know, I tend to preach simplicity when investing.  Let’s face it – most people don’t have hours each day to devote to it.  Making it too complicated will get you in trouble more times than not.  It really is an extensive topic when it comes to stock market training.

If you’re interested in learning more about technical analysis of the stock market, by all means pick up a book and have a read-through.  My only suggestion is to keep in mind it takes hundreds of hours of effort to be able to use it effectively and even then there is no guarantee.

As always, I wish you the best!

As a simple example, if one day the DOW opens at 10,000 and trades between the range of 9,950 and 10050 throughout the trading session, it is less volatile than a day when it opens at 10,000 and trades between 9,800 and 10,200.

For a much more technical and detailed explanation, you can go here : http://en.wikipedia.org/wiki/Volatility_%28finance%29

Many people love trading when the markets are volatile because there is more price action to try to profit from.  If you can buy at the right time, you can potentially profit from a greater upswing in price than you would on a non-volatile day.

I certainly believe that there is a potential to make money in the stock market when it’s volatile, however I’m not sure the average trader should aim for this goal.  Sure – you might catch a favorable upswing.  But you’re probably just as likely to catch a not-so-nice downswing.

I’ve seen many people have their bankrolls eaten up because of volatility.  These people often would have done a lot better had they just used a simple buy and hold strategy.

As I have preached before, I think using a simple strategy when investing is often the best method, especially for “non-professionals”.  I’m sure there are many brilliant people who have devised ways to profit from big market swings, but most people just don’t have the time or resources to devote to making money this way.

My advice – try to understand what is driving the volatility, but not get caught up trying to get rich from it.

As an example, in May of this year the market had some horrible days.  It looked like it was going to continue to trend downwards and volatility was picking up.  In this case, panic had hit the markets and was – in my opinion – the reason for the big price swings.  The price action wasn’t “logical”, but rather dictated from human behavior during a time when the market was scared.

If you were able to understand this and “weather the storm”, you could have saved yourself a lot of money by not panicking and selling during the downturn, only to see it go back up shortly thereafter.

All the best and hope the markets go your way!