A:  Great question!  Yes – the market gives you fresh information every day – don’t ignore it.  You originally set your stop based on the information you had at that time.  With new information (a candlestick reversal, news event, etc.) you may want to close a position even before it hits your stop.

Q: Does The Equity Oracle cover small cap penny stocks?   – Mark

A:  The Equity Oracle and Options Oracle generally do not consider penny stocks as trade candidates.  Occasionally, The Equity Oracle may address penny stocks from an educational standpoint to illustrate how they vary from higher-priced stocks.

Q: How much should my trading account be to make the Oracle worth the subscription?   – Bill

A:  You can certainly benefit from the Oracle education regardless of your account size.  If you’re thinking in terms of trading your account and paying for your subscription, we recommend at least US$5000 in your trading account.

Q: I have spoken to some “experienced” traders which have completely pulled out of the market and moved in cash as they said its a bear market. In your opinion are we in a bear market? If not would what are the indicators of a bear market?   – Mark

A:  Are we in a bear market?  Yes!  Are we in a bull market?  Yes!  The answer is, there are both bear and bull markets right now.  For a while, oil and gold were raging bulls.  Recently, we have seen the clear bear prints in the financials.  By definition, a bear market is a 20% pullback from the highs.  The main point is this – the market is not homogenous.  You can always find stocks to buy and stocks to sell; regardless of the direction of the major indices.  Therein lies your opportunity.  Happy hunting!

Q: Hey, Rick! I just watched one of your webinars through E*TRADE FINANCIAL and really enjoyed it! I took notes on it and everything. It was very informative. However, I have a question for you: once I finished watching your live webinar on price, I watched an archived one on conditional orders. I would like to know what the difference is between ‘sell stop’ orders and ‘stop limit’ orders. I was a little bit confused when someone asked a question on stop limit orders and just needed some clearification. Thanks!   – Connor

A:  A sell stop order is a stop order that becomes a market order upon triggering.  A stop limit order is a stop order that becomes a limit order upon triggering.  A great resource to learn more about stop orders and risk management is the 2007 Webinar Library.  The 10-DVD set includes sessions on conditional orders and much more!

Q: I’m trying to settle on a decision-making strategy for stock-picking. Suppose I run the Strategy Screener in Power E*Trade Pro and I come up with some individual stocks that look like good buys or good shorts. Do I pass the trade if: 1. The market is trending in the wrong direction. 2. The industry is trending in the wrong direction. 3. The market or industry has no clear direction, and is quiet. 4. The market or industry has no clear direction and is whipsawing violently? Or, basically: when does ‘the general conditions don’t favor the trade’ override ‘this individual stock looks good’?   – Kate

A:  The overall market and sector/industry trends should be taken into consideration but the go/no-go decision will be based on the stock itself.  For example, when oil prices were shooting up, we saw many days when the indices were weak but OIH, for example, was strong.  A strong move in the market will tend to influence trader/investor sentiment, of course.  Buying an uptrending stock in an uptrending sector will tend to be a better trade than buying an uptrending stock when the rest of the sector is falling.  Whatever your choice, be sure to follow The Market Guys’ 1% Rule and you’ll know what to do if your pick is wrong!

A:  The 1% Rule is Point #4 in the The Market Guys’ Five Points for Trading Success.  Specifically, refer to Chapter 12 which deals with applying the 1% Rule to your risk management plan.

Q:  With The Options Oracle, will it be suitable for a trader that only have level 2 option level approved on his or her account?

A:  With an E*Trade Level 2 account, you will be able to execute some of the trades, but it is recommended that you apply for Level 3 for full participation.

Q:  Is your radio show available online?

A:  You bet!  Just click on the Podcast tab above!

Q:  What’s wrong with taking a bit more risk by allocating more than 20 percent to stocks?

A:  We suggest allocating no more than about 20% of your portfolio to active trading.  You may allocate more than 20% to stocks overall.  There are a number of factors that will affect your overall portfolio allocation including risk tolerance, goals, how long before you need the money and current income.  Remember the point we made in the webinar:  every reward comes with its own attendant risks.  Your responsibility is to manage the risks as best as possible.

Q:  If you’re only trading 20% of your money, where do you have the other 80%?

A:  That will be unique for each individual but it may include index funds, real estate (both direct and securitized, such as REITs), cash or cash equivalents, fixed income and commodities or precious metals.  You should consult a financial planner to assist you in your overall allocation for your specific needs.