No doubt, if you read this report every week, you can gain some insights into how to profit more from the stock market.
This week, my aim is to help you with this endeavour by delving into the three essential components every trader can integrate into their trading plan for success.
That’s because trading is more than just making money; it’s about implementing a structured approach that consistently generates profits while mitigating risks.
Firstly, you need to have a good strategy or what is often referred to as having an ‘edge’. Basically, this means developing a well-thought-out plan that gives you a proven statistical advantage over the market. Creating a plan or gaining an edge is far easier than you might think. If you’re a trader, your plan could be based on charts, or if you are an investor, it may include studying the fundamentals of a company. I prefer a combination of both as it gives me the best of both worlds. What’s most important is that you stick to your trading plan, even when things get tough. That’s why I advocate that you document your plan to ensure you stay on track.
The second essential component is to manage your risk and money wisely. This means using only a small amount of your money on each stock you buy, as this ensures you don’t lose everything if things go wrong. I recommend you don’t invest more than 1 to 2 per cent of your total capital in any one stock. What’s also essential with proper money management is that you need to use a stop loss to protect yourself from big losses. This is important because it keeps you in the market even if you have a few bad trades in a row. I recommend setting your stop loss no more than 15 per cent below your buy price.
Finally, you need to keep it simple. Don’t make things more complicated than they need to be. Just focus on what you know and keep your trading plan easy to understand. If you’re a trader who uses charts, keeping it simple means having a few clear rules that you can easily follow.
There is nothing worse than having a bunch of different criteria for getting into a trade that you can’t explain to your partner as this often results in missed trades due to analysis paralysis, or, getting into the wrong trades. If you keep things simple, you will be able to make quick decisions with a high degree of accuracy and take advantage of opportunities when they come up.
Best & worst-performing sectors this week
The best-performing sectors include Healthcare, Consumer Staples and Energy as they are all up over one and a half per cent.
The worst-performing sectors include Information Technology, which has fallen down over one per cent, followed by Utilities and Communication Services, which are both down under half a per cent.
The best-performing stocks in the ASX top 100 include Ansell (ASX:ANN), which is up over 5 per cent, followed by AMP (ASX:AMP), which is up exactly 5 per cent and Brambles (ASX:BXB), which is up over 4 per cent. The worst-performing stocks include IDP Education (ASX:IEL) and Washington H. Soul Pattinson (ASX:SOL), which are both down over 5 per cent followed by ALS Limited (ASX:ALQ), which is down just under 5 per cent.
What’s next for the Australian stock market?
This week the buyers have continued to support the Australian stock market as they pushed prices higher resulting in the All Ordinaries Index rising around 0.5 per cent so far this week.
If buyers can keep control this week, then I anticipate the all-time high will be the next level they break on the way to a solid finish for March.
Should the buyers take out the all-time high, then my target is that it will rise to 8,200 to 8,400 points before seeing any possible resistance.
Please keep in mind that this week is a short week with Easter, so no trading will occur on Friday or next Monday. Typically, Easter is a quiet time on the All Ordinaries Index, therefore, don’t be surprised if the market finishes flat for the week, as many investors are preparing to make the most of the long weekend.
That said, I expect the market to heat up again in April with a lot of volatility, which we all need to be prepared for. I’m also preparing my clients for where I see the market heading in the short, medium, and long term, and, more importantly, when the next crash could happen.
Right now, I believe the next few years will be the time when fortunes are made and lost. What you experience will depend on the decisions you make.
My team & I wish you all a very happy & safe Easter and, of course, good luck & good trading.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online at www.wealthwithin.com.au
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