"The Little Black Book of Stock Market Secrets" By Matthew R. Kratter - Book Review
If you want to read something simple and quick on the stock markets, this book is all you need to learn the secrets.
It provides some decent tips and helps you probably improve your knowledge of the stock markets. If you are ready to unveil trading secrets, the book provides, then go for it.
Who Can Learn to Trade and What to Expect?
This book is a beginner-friendly book and a good resource for beginners. Reading various books gives you an overview of the markets, and this book does not let you down on that front.
There are some good pieces on psychology in trading. You will come across several tips; never place a trade based on what's been told in Barron’s Forbes or the Wall Street Journal. If you don’t wish to be the person who says the stock market is rigged, then it’s not a bad idea to learn from someone else’s mistakes.
Types of Markets and How to Trade Them
The author chose to classify markets into two types, trending markets and sideways markets. The difference in being successful lies in being able to identify the market type to trade them. Let’s look at both these types and how to trade them.
Trending markets are those that keep moving in the same direction for an extended period. A trending market can be either on the uptrend or in a downtrend. Even though these are classified under trending markets, they need to be traded differently.
These markets are traded differently because the behavior of market participants displayed in each of them is different. For beginners, the below characteristics can be seen in both up-trending and down-trending markets.
Strong uptrends often start with a burst of momentum, usually on higher than average volume. Trends sometimes start with a gap-up in prices, not allowing the shorter to exit. This triggers more shorts being covered which may build up impulsive buying that may follow.
The author shares some valuable tips on how to trade uptrends.
In an uptrend, always try to buy high and sell higher.
Never short the market or stock when indicators like RSI & Stochastics remain overbought in strong uptrends.
Be wary of shorting a stock if it continues to hit new 52-week highs in strong up-trending markets.
Use the daily average volume for reference, and don’t be afraid to buy higher if the daily volume is greater than the average volume.
Always trade in the direction of the trend.
20-50-200 day moving averages are some important guides to gauge the strength and direction of a stock.
Similar to uptrends, strong downtrends often start with a burst of downward momentum, like a rocket crashing into the earth. The initial momentum could be created by a gap or a bearish candlestick pattern.
These are some simple yet effective ways to trade strong down trending markets.