Short Term Trading the S&P 500"We've discussed long term investing and last week I outlined my Trading Plan for you - would you like to see my short term trading strategy in action and the trades I took as I traded the S&P 500 Index down into the low two weeks ago?" Peter asked Paul at their next meeting. Paul had spent the last week back testing the Trading System Peter had shared with him on several Stocks and the S&P 500 Index, with great results, and he was ready to learn more. "I certainly would," he replied. "OK, lets get to it then," Peter said as he opened his charting software to a chart of the S&P 500 Index, then scrolled back to the top of the most recent leg down. Paul looked on as he took him through his recent trades. Please Click on the chart below to open a larger version in a new window. "You can see on this chart," Peter continued - 
Source: Incredible Charts - www.incrediblecharts.com.au "That the 105 day and the 30 day moving averages are both trending down, therefore that is the direction successful people trade - until you know a lot more about time cycles and support and resistance, you will only trade in the direction of the trend," Peter told Paul. "I have marked where I took my initial position - and my additional entries are numbered here from 1 to 9, then the final panic sell-off into the low at 775 points. I just kept compounding my position after each lower top was confirmed and the result was a significant profit. "Anyone could have done what I did here, but few traders have the ability to be able to be right with the trend and sit tight. They tend to jump in and out and never make anywhere near as much money as they could have if they had just been able to control the emotions of fear and greed. "You can see that the Index made many attempts to rally, but each time the buyers were overwhelmed by a fresh bout of selling. "The rallies within the downtrend never exceeded two days - this was a very powerful trend, but there were buyers all the way down, trying to pick the bottom. By the time the low did come along, most of the buyers had spent all of their emotional and monetary capital in a futile attempt at bottom picking that was doomed to failure. "Even when he Index got down to 775 points, I still only bought two futures contracts - I wasn't prepared to bet too much on my analysis being right. And my long term portfolio was still short this Index. "Study this chart and you will gain an understanding of how you can make big profits in a short time trading the market. By doing what I did here, you will build wealth quickly with a minimum of risk. That should be your goal. "Then, when you make a substantial profit, transfer the bulk of it to your long term account and invest it wisely. Never leave a large amount of money in your trading account - you will be tempted to use it and run the risk of giving it all back to the market. "Wealthy people protect the downside. That is how they stay wealthy." Paul studied the chart intently - he knew exactly how to trade now. He had been paper trading for several weeks and was making good paper profits. It was time to test his new found knowledge in the market. It was time to take some live trades himself to see how his emotions would react - could he control his fear and greed... To go to the next chapter, please Click Here.
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