Mastering the Stock Market: High Probability Market Timing and Stock Selection Tools (Wiley Trading) by John L. Person

CHAPTER 1
Stock Indexes and Sectors
For those picking up this book who have little to no experience in the
markets, I'll start off by welcoming you to the world of trading and
investing. One of the greatest achievements for the human mind and psyche
is to identify a business opportunity and then profit by taking decisive
action.
Let me start off by addressing the newcomer or novice investor. I am not
going to scare you away with heavy technical stuff, at least not now because
that will come later. For the advanced trader, there are quite a few golden
nuggets of trading concepts packed in these pages.
I want to share with you a story about my next-door neighbors'
experience. These are awesome people. The husband is retired; the wife
works as a travel agent in a North Shore suburb of Chicago. As the world
was facing the financial crisis back in early 2009, the wife came over to our
yard while I was surveying the garden. She knew that I worked in the
financial markets, but had no idea exactly what I did. In the past, she had
seen me on CNBC commenting on gold or crude oil and wanted my opinion
on what to do. She had a feeling that stocks were too cheap and that there
might be something she should get in on. She was right; stocks were cheap
in March and April 2009.
She explained that they hadn't invested in stocks since the tech wreck of
2000, but they had some money and wanted some advice. I had her come
over the next week for a lesson. All we did was go over some companies
and get her online to open a self-directed trading account. The online
trading company at the time was Thinkorswim. Some of the stocks we
started her off with were General Electric (GE), Starbucks (SBUX), and
Bank of America (BAC), and then later she asked me about other names
like McDonald's (MCD). I talked and she listened, and more importantly,

took decisive action. I found it amusing when making comments like “here
is where your stop should go.” It was like I had just said something in a
foreign language. But she learned. I am not saying she experienced enough
success to start her own hedge fund, but she did experience success.
I wanted to start the book off with this story to show the beginner that
good things can and do happen, but it takes the human mind and psyche's
ability to identify an opportunity and then take decisive action.
Technology in the new millennium has given all of us a more equal
playing field as far as pricing in regards to the cost of doing business, direct
access to the markets by means of the Internet, and transparency by means
of order execution platforms.
Many individuals exclude themselves from the markets for one reason or
another. As it has been said, I believe more people plan for a family holiday
than they do for their investments or financial futures. Perhaps others have a
profound fear of loss and shy from making effective reasoning rationale.
Yet this is a business where it takes money to make money. There is no
question about that. One has to be able to afford to lose once in a while and
not let that hinder one's ability to make better educated and therefore more
reasonable actions in the markets. My goal in this book is to help you to
learn how to structure a formulated perspective in order to overcome all
disputes that often lead to poor judgments or inaction.
Remember, the reason you are looking to trade is simple: to make money.
Never forget this. Friedrich Nietzsche, the German philosopher, stated long
ago, “The most fundamental form of human stupidity is forgetting what we
were trying to do in the first place.” Never forget that this is the bottom line,
to make money. Yet many do, mostly as fear, doubt, and greed interfere
with rational thinking.
In order to give you the edge, I want to take a comprehensive look at how
we can use the information in this book and apply it to real-time trading.
There are obviously volumes of different material we can look at, like
macroeconomic effects and the business cycle. Or microeconomic events
like earnings and other situations that will impact a stock or a sector and the
overall market's performance. Quite frankly, we will most likely cover
many of those subjects in this book.

Mastering the Stock Market: High Probability Market Timing and Stock Selection Tools (Wiley Trading) by John L. Person