Never Let Wall Street Steal Your Money Again!!

By Tony Ponzo

CAN YOU MAKE EXTRA INCOME FROM TRADING?

Of course you can! Every day you see interviews on CNBC, Fox Business or Bloomberg with traders who have turned their knowledge of trading disciplines into making a living, with some becoming very wealthy from it. Don't let Wall Street steal your money while you try to learn the markets through trial and error; take a lesson from the pros:

* Learn how to read the market.
* Learn option strategies to fit any market direction.
* Learn how to analyze stock fundamentals.
* Learn how to decipher stock news.
* Learn trading techniques that eliminate emotion.
* Learn how to set exit points before you even get into a position.

Trading strategists, Tony Ponzo and Mike Celeste who have managed the successful strategies published at splitmaster.com for 14 years, have brought their decades of trading knowledge into an easy to follow, step by step fun book with detailed examples of actual trades. Never before have so many elements of the stock and option market been put together in one place. So much knowledge for so little money! It will save you a bundle. Buy it today!

• Language: English
• Publisher: Tony Ponzo
• Release date: Aug 20, 2012
• ISBN: 9781476325255

Tony Ponzo

About the Authors Tony Ponzo along with Mike Celeste are entrepreneurs who, between them, have created a number of successful companies which encompassed the medical claims processing business, program development for pharmacy management systems, and information technology for research purposes in a number of fields including stock investing. Mike & Tony, with over 65 years combined stock trading experience, along with Tony's wife Pat Ponzo, and Mike's son Tony Celeste, formed a partnership in early 1997 for the purpose of testing and expanding on winning stock strategies. The first strategy was based on stock splits. Mike and his son, for several years, had been studying the characteristics of stocks that split. The partners continued this study by developing software to analyze splits and to answer two questions they had: Do the majority of stocks that split increase significantly in price within a short time period surrounding the stock split date? Is there some common denominator as to when these stocks increase in price? The analysis showed overwhelmingly that stock splits do indeed increase in price during specific times. From their analysis, a stock split system was created that is unlike any other system on the market. They then launched the website SplitMaster.com in 1999 that rapidly became a leading stock split strategy on the Internet. SplitMaster.com grew to over 6,000 members that either followed the strategies and/or read their weekly newsletter. In 2007, new strategies and studies were added based on Day and Swing trading using options. The partners employed their years of knowledge of options to develop several option trading strategies to optimize the odds of profitability. These option strategies came just in the nick of time to combat the Great Recession. The number of companies splitting their stock basically disappeared for obvious reasons. But members who switched to the option strategies were rewarded, as the strategies posted triple digit profits every year! Although SplitMaster was a successful service, after 12 years, the partners have decided to retire that service and concentrate on the educational aspects of trading and making their own personal trades. However, as of the date of this writing, the site and its past results are still on line at http://www.splitmaster.com

Book preview

Disclaimer

The purpose of this book is for educational purposes only. It is intended to teach the reader about stock and option terminology, technical analysis, and various trading strategies. The authors are in no way acting as financial advisers or investing brokers and none of the ideas and concepts embodied in this book should be taken by the reader as recommendations to make any specific investments. Any action the reader takes using the ideas and concepts within this book are solely at the reader's discretion. The sources we have used for reference are reputable sources and are deemed reliable but we make no guarantee as to their accuracy or completeness. Neither SplitMaster.com, its principals, or publishers, are liable for any losses or damages, monetary nor otherwise, that result from any investment made by the reader using the principles within this book. The publishers of SplitMaster.com recommend that anyone trading securities should do so with caution and consult with a broker before trading. Further, any investor using options as an investment vehicle should be fully educated on the fundamentals of options. Contact CBOE or your broker concerning options. We highly suggest that the reader ask his/her broker to send a copy of the Characteristics & Risks of Standardized Options booklet and study it thoroughly before trading options. Any investment in securities or options should be considered speculative with a high degree of volatility and risk and could result in monetary losses.

About the Authors

Tony Ponzo along with Mike Celeste are entrepreneurs who, between them, have created a number of successful companies which encompassed the medical claims processing business, program development for pharmacy management systems, and information technology for research purposes in a number of fields including stock investing. Mike & Tony, with over 65 years combined stock trading experience, along with Tony's wife Pat Ponzo, and Mike's son Tony Celeste, formed a partnership in early 1997 for the purpose of testing and expanding on winning stock strategies. The first strategy was based on stock splits. Mike and his son, for several years, had been studying the characteristics of stocks that split. The partners continued this study by developing software to analyze splits and to answer two questions they had:

Do the majority of stocks that split increase significantly in price within a short time period surrounding the stock split date?

Is there some common denominator as to when these stocks increase in price?

The analysis showed overwhelmingly that stock splits do indeed increase in price during specific times. From their analysis, a stock split system was created that is unlike any other system on the market. They then launched the website SplitMaster.com in 1999 that rapidly became a leading stock split strategy on the Internet. SplitMaster.com grew to over 6,000 members that either followed the strategies and/or read their weekly newsletter.

In 2007, new strategies and studies were added based on Day and Swing trading using options. The partners employed their years of knowledge of options to develop several option trading strategies to optimize the odds of profitability. These option strategies came just in the nick of time to combat the Great Recession. The number of companies splitting their stock basically disappeared for obvious reasons. But members who switched to the option strategies were rewarded, as the strategies posted triple digit profits every year!

Although SplitMaster was a successful service, after 12 years, the partners have decided to retire that service and concentrate on the educational aspects of trading and making their own personal trades. However, as of the date of this writing, the site and its past results are still on line at http://www.splitmaster.com

Introduction

What to Expect in this book

The authors of the book did not write it with the intentions of giving the reader a get rich quick scheme. Rather, their intentions were to teach and give the reader the knowledge needed to make good, sound and logical trades that will significantly improve the odds of making profit in the stock market. Further, the authors' intentions are to teach its readers to use the many tools available at most brokerage houses to make stock and option trades in very creative ways that allow for profits whether a stock goes up, down or both. The possibilities on how to make option trades are numerous and once you gain the proper knowledge, your creative juices should freely flow. You've heard the saying, Feed a man a fish and you have fed him for the day. But teach a man to fish and you have fed him for a lifetime. That is what the authors strive to accomplish.

The title of this book is not meant to scare you or put a negative outlook on the market. It is just a fact, whether intentional by the powers controlling things or just the nature of the beast, the stock market is set up to be against you - to take your hard earned money. But that doesn't mean people can't and don't make fortunes on the stock market. Many, in fact, make a great living. Some become among the wealthiest people on the planet. One name that comes to mind is Warren Buffett. You know who he is, right? There is a reason why these people win in the stock market. It's called knowledge! Learn how the game is played. Learn how to analyze every aspect of investing in the stock market and never enter a trade unless you put the odds in your favor first. Hopefully you will also find the book fun and interesting.

But know this. Trading is work, pure and simple. It takes time in research and analysis, and even then there is no guarantee of consistent success. Here, you will get a big head start though. Reading and studying this book will bring you to a level of knowledge that otherwise has to be learned through a trial and error process that takes most people years.

Don't get us wrong. There are many legitimate trading websites that have beneficial strategies to follow. But with this added knowledge, it will allow you to understand and anticipate the nature of these strategies and help you become a better trader, period.

In the first chapter there may be information you already know, especially if you have had some experience with stocks. You can skip any part of the book that you feel you already know but consider reading it anyway. There could be some bits of information that will be new to you. In any case, keep reading as, while the book starts off with basics, it moves into intermediate and advanced concepts in an easy to follow, fun manner.

Oh, one more thing. Don't forget to take the test at the end of each chapter. Enjoy!!

Table of Contents

Disclaimer

About the Authors

Introduction

Chapter 1- First Things First

(A Quick Guide to Trading Basics)

Stock Market Basics and a Little History

Opening an Account

Buying and Selling

Shorting - What is it?

Stops - What are they?

Chapter 1 Test (answers in Chapter 11)

Chapter 2 - Knowledge is Power

(Using the Fundamentals)

Why Do We Need to Know the Fundamentals?

Day Trading Tips

News Moves Markets-And Stock Prices!

The Long and Winding Investment

Yahoo Finance

Making the Grade

Blank Grading Form to Copy and Use

Chapter 2 Test (answers in Chapter 11)

Chapter 3 - The Crystal Ball

(Technical Analysis)

Pinpoint the Time to Buy

Getting a Good Chart Program

Chart Basics

Support and Resistance Points

The Indicators

The Williams % R

The RSI

The Moving Averages

Chapter 3 Test (answers in Chapter 11)

Chapter 4 - Create Your Own Luck

(Finding Winning Stocks)

Finding Stocks (Pieces of Gold)

Trading Discipline and Strategies

Emotion

Chapter 4 Test (answers in Chapter 11)

Chapter 5 -Using Leverage to Build Wealth

(Option Basics)

Options - Unveiling the Secrets

The Call Option

What is an Expiration Date?

Strike Prices

Option Chains

In-The-Money, Out-of-The-Money

The Put Option

Chapter 5 Test (answers in Chapter 11)

Chapter 6 - Attracting Profits

(Advanced Options- The Edge)

The Greeks

Volatility

An Amazing Story

Taking Advantage of Volatility on Calls

The Covered Call - A Safe Play

Taking Advantage of Volatility on The Put

Chapter 6 Test (answers in Chapter 11)

Chapter 7 - Build an Income Stream

(In Up Trending Markets)

Strategies for Up Trending Markets

Intermediate Level - Up Strategies

Advanced up Strategies

Chapter 7 Test (answers in Chapter 11)

Chapter 8 - Build an Income Stream

(In Down Trending Markets)

Strategies for Down Trending Markets

Intermediate Down Strategies

Advanced Down Strategies

Chapter 8 Test (answers in Chapter 11)

Chapter 9 - Build an Income Stream

(In Flat Trending Markets, Plus More)

Simple Strategies for a Flat Market

Higher Risk - Flat Strategies

Advanced Strategies for a Flat Market Trend

Chapter 9 Test (answers in Chapter 11)

Chapter 10 - Now Go and Prosper

(Some Final Thoughts)

Chapter 11 - Test Answers

References

Glossary

Chapter 1

First Things First

(A Quick Guide to Trading Basics)

Chapter insight: What the mind of man can conceive and believe, it can achieve… Napoleon Hill

Stock Market Basics and a Little History

Everyone knows what the stock market is. But we'll explain anyway. It's a place where people invest their hard earned money buying or selling very small pieces of public companies for the then going price and those pieces are called shares. Buying and selling shares of stock is also called investing or trading. The plan is to have those shares of stock you buy appreciate in value so you achieve financial growth and to maybe eventually build a fortune. Through the market you can also buy options, bonds, and commodities, such as gold and invest in mutual funds. A mutual fund or ETF are entities created by a financial firm that buys, sells and manages many different investments so a lot of people can invest in a broad spectrum of stocks through one vehicle. All these investments can also be referred to as securities. And all these shares you own plus whatever cash you have, make up your portfolio.

There has been a problem with investing money in the stock market from March of 2000 through the end of the decade. The problem is that the market had basically gone nowhere. In the years 2000, 2008 and part of 2009, the stock market sustained a lot of damage. Those years kept it from making progress over the decade.

During those times the market felt more like a place to invest your hard earned money to see how fast you could go broke! But what if you had the knowledge to invest in such a way that you could have avoided big losses during those down times or maybe even prosper in down markets? Keep this question in mind as you read through the book.

There was a time when investors could put their money in reputable DOW companies and let it sit for years and watch their portfolios increase. Sure there were fluctuations but basically over ten years, investors could expect their portfolios to grow much faster than inflation and give much better returns than they could earn in a savings account or a Certificate of Deposit (CD). This is not true of the decade 2000 through 2010. Take Microsoft (MSFT) for example. Back in early 2000 we bought MSFT for the equivalent of about $39. We say equivalent because it split its price in half in February of 2003. At the time of this writing, MSFT was trading for about $25.79. Less than what we purchased it for ten years ago. And MSFT is considered a very sound company - a blue chip stock with lots of profits and billions in cash. So then why invest in the stock market at all these days?

That's a very legitimate question and one that has to be truly examined. What we hope to do in this book is teach you some techniques that will introduce you to tools and strategies that will not only help you cope with these kinds of markets but teach you to prosper in any market. We always say that there is always someplace to find profit. When one method of profit dies out, there is another to be found. The trick, of course, is finding where the profit is. In this market we think one way to deal with it is in much shorter term trading - even day trading. Long term just is not working at this time, in our opinion. Also, learning to take advantage by changing with the momentum of the market is where profits can be found. There are ways to trade the market even if the momentum is changing daily; and we will be discussing that in the following chapters. There are also times when it is good to sit back and wait for a better trading market, because not losing is good too.

And if you are wealthy, you can buy 10 shares of Warren Buffet's company - Berkshire Hathaway (BRK-A), which at the time of this writing would cost you about $1,080,000.00 (that's million, not thousands) or about $108,000.00 for one share. Most of us will not be buying the stock anytime soon.

Public companies have tens of thousands to millions of shares available to trade every day. In other words, trading shares of stock through the stock market is very liquid - or easy to trade. You can buy or sell in seconds. When you buy shares of stock you are buying it from another trader or investor who wants to sell and vice versa.

It used to be that you had to do your buying and selling through a middleman called a broker and it cost a few hundred dollars in commissions every time you purchased shares of stock. Then when you sold your shares, you had to pay it again. It can still be done that way and people with big portfolios who feel more comfortable using a broker still use them, but there is absolutely no reason to do so. Today, with such powerful technology, and such a vast source of information at your fingertips through the Internet, there is no reason not to do your own trading.

Sure, maybe a broker can help you pick a good stock to invest in if you don't know how to do that, but here again, with the Internet there are many really good research sites to help find good companies to invest in. Yes, this will take some time to do and the better you become at it the better your investments will be. But after all, it is your hard earned money and who better then yourself to decide where to invest that money? Sites such as Yahoo Finance or Google Finance have pertinent information about a company's fundamentals, goals and expectations, recent news and so forth that can help you determine which companies make sense to invest in. This book will show you how to analyze this information.

Opening an Account

You may know the following information, but there may be some of you who are just getting started and will find this next bit of information helpful. If you want to start trading stocks, you need to get on the Internet and locate a reputable brokerage firm that has great on-line trading tools. If you already have one then great! But if not, open an account at the brokerage of your choice. One obvious point - your account has to have enough money in it to cover the trades you want to make. You can get a margin account, which will allow you to borrow to trade beyond your own money and we'll discuss that in a minute. There are many good companies, but here are just a few for you to check out: TD-Ameritrade, ThinkorSwim (they are part of TD-Ameritrade but ThinkorSwim has more advanced technology to help you trade), E-trade, OptionsXpress, and Scottrade. All of these not only have great on-line tools and tons of training tutorials, they also have low commissions. In most cases you can buy any amount of shares of a stock for as low as $9.00 per trade. And depending on the size of your account or number of accounts you bring to a brokerage, you can negotiate your commissions to a lower cost. Don't forget this little tidbit - negotiate!

Once you set up your account, learn how to work the real time streamer that all of these companies supply - usually for no extra charge. It's easy to do and these companies have great tutorials. With the streamer, you can enter the stocks you want to follow and you can see what price they are trading for by the second. There are a lot of pieces of information you can put up on the streamer that your brokerage firm will teach you about, and it will all flow to you in real-time, second by second.

Let's discuss a little about the different types of accounts you can open at a brokerage. This should be discussed with your broker and/or other financial advisors before opening an account.