Stock market commentary, analysis, insight and opinion of the RightLine Editors is available every Tuesday/Thursday evening & Saturday afternoon. The following is excerpted from the:

Notes From The Editor

Here's an easy yet extremely effective way to view the stock market. Instead of worrying about what it may or may not do, spend your time planning what you will do specifically in response to the "one thing" that the market always does.

The job of a trader distills down to a very basic task. Our primary objective is to capture price movement. While trying to predict price direction may seem like the logical first step in capturing movement, it actually overcomplicates the process. Studies show that it is virtually if not literally impossible to consistently predict the direction of price movement. Attempting to do it is usually an unwise investment in time and energy.

Okay, back to the "one thing." The one thing that the market always does can be stated in one word; MOVE. When it comes to the stock market the most important quality is an action - price movement, for it's in the price movement that profits are made.

There are only three specific ways that the market can move. Up, down, or sideways. Instead of trying to predetermine which of these three will occur next, it's much easier to use a strategy that captures movement regardless of direction.

There are a number of methods that work well with this approach, but we won't go into the details of specific setup and entry requirements today. However, we can start to lay the foundation for understanding this strategy by asking ourselves two simple questions within the context of the three possible ways the market can move - "What" and "When."

What and When should always be considered in advance of entering any position to arrive at specific entry and exit instructions for these possible scenarios:

Entries:

a) price goes up

b) price goes down

c) price moves sideways

Exits:

a) the trade moves in your favor,

b) the trade moves against you,

c) the trade doesn't move at all.

"What & When." As far as these two are concerned, details matter. It isn't a good idea to approximate, or wait until you "get there" to decide what to do. Plan ahead, put it in writing, and always include the specific conditions and/or price levels for entries and exits. When using a trailing stop method to lock in gains, make certain that you plan in advance exactly when the trailing stop will be adjusted.

Bottom line: Always ask, "What & When" BEFORE you put money in the market.

Trade well,

~ Thomas Sutton

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