The Little Black Book of Stock Market Secrets: What Every Trader Needs to Know

The Little Black Book of Stock Market Secrets: A Review

If you are looking for a book that can teach you how the stock market really works and how you can make money from it, you might want to check out The Little Black Book of Stock Market Secrets by Matthew R. Kratter. This book is a concise and practical guide that covers various topics related to stock trading and investing, such as gaps, trends, market leaders, indicators, strategies, mindset, risk management, and more.

The Little Black Book of Stock Market Secrets downloads torrent

Matthew R. Kratter is an Amazon best-selling author and a retired hedge fund manager who has over 20 years of experience in trading profitably. He has written several books on different aspects of trading, such as swing trading, options trading, day trading, candlestick patterns, etc. In this book, he shares his secrets that he has used to trade successfully in different market conditions.

In this article, we will review some of the main topics covered in the book and see how they can help you improve your trading skills. We will also provide some examples and tips from the book that you can apply right away. Whether you are a beginner or an experienced trader, you will find something valuable in this book that can take your trading to the next level.

The one thing you must never do if a stock gaps to new highs

One of the first topics that the book covers is how to deal with gaps. A gap is when a stock opens at a price that is significantly higher or lower than its previous close. Gaps can indicate strong momentum or sentiment in the direction of the gap. However, they can also be tricky to trade, especially if you are not familiar with them.

The book warns you about the one thing you must never do if a stock gaps to new highs: chase it. Chasing a stock means buying it after it has already made a big move, hoping that it will continue to go higher. This is a risky and emotional behavior that can lead to losses and frustration. Instead, the book advises you to wait for a pullback or a consolidation before entering a trade.

One of the tools that the book recommends for trading gaps is Bollinger Bands. Bollinger Bands are a set of three lines that surround the price action of a stock. The middle line is a simple moving average, and the upper and lower lines are standard deviations away from the middle line. Bollinger Bands can help you identify volatility, trend, and potential reversal points in the market.

The book suggests a simple strategy for trading gaps using Bollinger Bands. In an uptrend, you should try to buy high and sell higher. Buy when a stock closes above the top Bollinger Band (try using a period=80), and then exit when it closes below the middle Bollinger Band. This way, you can capture the momentum of the gap and avoid chasing it.

The simplest ways to make money in the stock market

The book also covers some of the simplest ways to make money in the stock market, which are often overlooked or ignored by many traders. These methods are based on some of the most powerful principles of investing, such as compounding, diversification, value, and growth.

One of the simplest ways to make money in the stock market is to take advantage of compounding and reinvesting dividends. Compounding is when your returns generate more returns over time, creating an exponential growth effect. Reinvesting dividends is when you use the cash payments that you receive from your stocks to buy more shares of the same or other stocks, increasing your ownership and income over time.

Another simple way to make money in the stock market is to use dollar-cost averaging and index funds. Dollar-cost averaging is when you invest a fixed amount of money at regular intervals, regardless of the price fluctuations of the market. This way, you can reduce your average cost per share and avoid timing the market. Index funds are funds that track the performance of a broad market index, such as the S&P 500 or the Nasdaq 100. They offer low fees, high diversification, and consistent returns over time.

A third simple way to make money in the stock market is to use value investing and dividend growth investing. Value investing is when you buy stocks that are undervalued by the market, meaning that they trade at a price lower than their intrinsic value. Dividend growth investing is when you buy stocks that pay and increase their dividends regularly, meaning that they generate consistent and growing income for their shareholders.

How to tell when you are in a bull market or a bear market

Another important topic that the book covers is how to tell when you are in a bull market or a bear market. A bull market is when the prices of stocks are rising or expected to rise, while a bear market is when the prices of stocks are falling or expected to fall. Knowing which market phase you are in can help you adjust your strategy and risk management accordingly.

One of the tools that the book recommends for identifying market phases is moving averages. Moving averages are lines that smooth out the price action of a stock by taking the average of its closing prices over a certain period of time. Moving averages can help you identify the direction and strength of a trend, as well as potential support and resistance levels in the market.

The book suggests using two moving averages: a 50-day moving average and a 200-day moving average. The 50-day moving average represents the short-term trend, while the 200-day moving average represents the long-term trend. When the 50-day moving average is above the 200-day moving average, it indicates that you are in a bull market. When the 50-day moving average is below the 200-day moving average, it indicates that you are in a bear market.

Another tool that the book recommends for identifying market phases is trend lines. Trend lines are straight lines that connect two or more points on a price chart, showing the direction and slope of a trend. Trend lines can help you confirm or invalidate a trend, as well as spot potential breakout or breakdown points in the market.

How to identify which stocks are market leaders

Another topic that the book covers is how to identify which stocks are market leaders. Market leaders are stocks that outperform their peers and the overall market, showing strong earnings growth, price appreciation, and relative strength. Market leaders can offer higher returns and lower risk than average stocks, as they tend to have competitive advantages, loyal customers, and innovative products or services.

One of the tools that the book recommends for finding market leaders is relative strength. Relative strength is a measure of how a stock is performing compared to a benchmark, such as an index or a sector. Relative strength can be calculated by dividing the price of a stock by the price of a benchmark, and then plotting the ratio on a chart. A rising relative strength line indicates that the stock is outperforming the benchmark, while a falling relative strength line indicates that the stock is underperforming the benchmark.

The book suggests using a 12-month relative strength chart to identify market leaders. A market leader should have a relative strength line that is above its 10-month moving average and making new highs. This shows that the stock is consistently beating its benchmark and leading the market.

Another tool that the book recommends for finding market leaders is earnings growth. Earnings growth is the percentage change in a company's net income over a certain period of time, usually a quarter or a year. Earnings growth reflects how profitable and efficient a company is, and how well it can generate value for its shareholders. Earnings growth can also influence the price of a stock, as investors tend to pay more for companies that can grow their earnings faster than others.

The book suggests looking for stocks that have high and consistent earnings growth over several quarters or years. A market leader should have an earnings growth rate that is above its industry average and above 25% per year. This shows that the company has a strong and sustainable business model that can deliver superior results.

10 ways to develop a winning trader's mindset

Another topic that the book covers is how to develop a winning trader's mindset. A winning trader's mindset is a set of attitudes, beliefs, and habits that can help you achieve your trading goals and overcome your trading challenges. A winning trader's mindset can make the difference between success and failure in trading, as it can affect your decision-making, risk management, and emotional control.

The book lists 10 ways to develop a winning trader's mindset, which are:

- Have a clear goal and a trading plan. A clear goal is what you want to achieve from your trading, such as a specific amount of money or a certain return on investment. A trading plan is how you intend to achieve your goal, such as what markets you will trade, what strategies you will use, what indicators you will follow, what entry and exit rules you will apply, what risk and money management techniques you will implement, etc. Having a clear goal and a trading plan can help you stay focused, disciplined, and consistent in your trading. - Be realistic and flexible. Being realistic means having reasonable expectations about your trading performance, such as how much you can make, how often you can win, how much you can risk, etc. Being realistic can help you avoid overconfidence, greed, and disappointment in your trading. Being flexible means being able to adapt to changing market conditions, such as volatility, trends, news events, etc. Being flexible can help you avoid stubbornness, bias, and missed opportunities in your trading. The secrets to trading in a bear market

Another topic that the book covers is how to trade in a bear market. A bear market is when the prices of stocks fall by more than 20% over a period of two months or more, due to widespread pessimism and negative investor sentiment. Trading in a bear market can be challenging and risky, as many traditional strategies and indicators may not work as well as in a bull market.

One of the secrets to trading in a bear market is to use short selling, inverse ETFs, and options to profit from falling prices. Short selling, as explained earlier, is when you borrow and sell a stock that you expect to decline in value, and then buy it back later at a lower price to return it to the lender and keep the difference as profit. Inverse ETFs are exchange-traded funds that track the opposite performance of an underlying index or asset, such as the S&P 500 or gold. Options are contracts that give you the right, but not the obligation, to buy or sell an underlying asset at a specified price and date. By using put options, which increase in value when the underlying asset decreases in value, you can hedge your portfolio or speculate on bearish movements.

Another secret to trading in a bear market is to use technical indicators and oscillators to time your entries and exits. Technical indicators are mathematical calculations based on price and volume data that can help you identify trends, patterns, support and resistance levels, momentum, volatility, and other aspects of market behavior. Oscillators are a type of technical indicator that range between two extreme values and indicate overbought or oversold conditions in the market. Some of the technical indicators and oscillators that the book recommends for trading in a bear market are:

- Moving averages: As mentioned earlier, moving averages can help you identify the direction and strength of a trend. In a bear market, you can use moving averages as dynamic resistance levels, meaning that they tend to act as barriers for price rallies. You can also use moving average crossovers as signals for trend reversals or continuations. For example, when a short-term moving average crosses below a long-term moving average, it indicates a bearish trend change. - MACD: The MACD (moving average convergence divergence) is an indicator that measures the difference between two moving averages (usually 12-period and 26-period) and compares it with a signal line (usually 9-period). The MACD can help you identify trend direction, momentum, and divergence. In a bear market, you can use the MACD as follows: When the MACD line crosses below the signal line, it indicates a bearish momentum. When the MACD line crosses above the signal line, it indicates a bullish momentum. When the MACD line diverges from the price action, it indicates a potential reversal. - RSI: The RSI (relative strength index) is an oscillator that measures the speed and magnitude of price movements and ranges between 0 and 100. The RSI can help you identify overbought or oversold conditions in the market. In a bear market, you can use the RSI as follows: When the RSI is above 70, it indicates that the market is overbought and may reverse soon. When the RSI is below 30, it indicates that the market is oversold and may bounce back soon.

How to use the RSI and Stochastics in different market environments

Another topic that the book covers is how to use the RSI and Stochastics in different market environments. The RSI and Stochastics are both oscillators that measure momentum and overbought/oversold conditions in the market. However, they have some differences that make them more suitable for certain situations than others.

The RSI is based on closing prices only, while Stochastics is based on both high and low prices. This means that Stochastics is more sensitive to price movements and tends to generate more signals than RSI. However, this also means that Stochastics is more prone to false signals and noise than RSI.

The book suggests using RSI when the market is trending strongly and using Stochastics when the market is ranging or choppy. This way, you can avoid getting whipsawed by false signals and capture more reliable signals.

The book also suggests using RSI and Stochastics as divergence indicators and trend confirmation indicators. Divergence is when the price action and the indicator move in opposite directions, indicating a possible reversal. Trend confirmation is when the price action and the indicator move in the same direction, indicating a continuation. The book explains how to use RSI and Stochastics as follows:

- To use RSI as a divergence indicator, look for situations where the price makes a higher high or a lower low, but the RSI makes a lower high or a higher low. This indicates that the momentum is weakening and the trend may reverse soon. To use RSI as a trend confirmation indicator, look for situations where the price and the RSI are both making higher highs or lower lows. This indicates that the momentum is strong and the trend may continue. - To use Stochastics as a divergence indicator, look for situations where the price makes a higher high or a lower low, but the Stochastics makes a lower high or a higher low. This indicates that the momentum is weakening and the trend may reverse soon. To use Stochastics as a trend confirmation indicator, look for situations where the price and the Stochastics are both making higher highs or lower lows. This indicates that the momentum is strong and the trend may continue.

How to run your trading like a business

The last topic that the book covers is how to run your trading like a business. The book argues that trading is not a hobby or a game, but a serious endeavor that requires planning, discipline, and professionalism. The book advises you to treat your trading like a business and follow these steps:

- Capital: Capital is the amount of money that you have available for trading. You should have enough capital to cover your living expenses, your trading costs, and your potential losses. You should also have enough capital to diversify your portfolio and avoid putting all your eggs in one basket. You should never risk more than you can afford to lose and never borrow money to trade. - Strategy: Strategy is the set of rules and guidelines that you use to make your trading decisions. You should have a clear and well-defined strategy that suits your personality, goals, risk tolerance, and market conditions. You should test your strategy on historical data and paper trade it before using it on real money. You should also review your strategy periodically and make adjustments as needed. - Execution: Execution is the process of implementing your strategy in the market. You should have a reliable and fast platform, broker, and internet connection to execute your trades. You should also have a trading journal where you record your trades, reasons, outcomes, emotions, and lessons learned. You should follow your strategy faithfully and avoid emotional or impulsive trading. - Analysis: Analysis is the process of evaluating your trading performance and results. You should have a set of metrics and indicators that measure your profitability, risk, efficiency, consistency, and improvement. You should also have a feedback system where you get constructive criticism and advice from other traders or mentors. You should analyze your strengths and weaknesses and identify areas for improvement. - Improvement: Improvement is the process of learning from your analysis and taking action to enhance your trading skills and results. You should have a learning plan where you set specific, measurable, achievable, relevant, and time-bound goals for your trading improvement. You should also have a learning routine where you read books, articles, blogs, podcasts, videos, webinars, courses, etc., on trading topics that interest you or challenge you.

Conclusion

and investing, such as gaps, trends, market leaders, indicators, strategies, mindset, risk management, and more. The book is concise and practical, and it provides examples and tips that you can apply right away. Whether you are a beginner or an experienced trader, you will find something valuable in this book that can take your trading to the next level.

The book has received positive reviews from many readers who have found it useful and informative. Some of the common praises are:

- The book is easy to read and understand, and it explains complex concepts in simple terms. - The book is comprehensive and covers a wide range of topics that are relevant for trading success. - The book is actionable and provides clear and specific guidelines and rules that can be followed and tested. - The book is honest and realistic, and it does not promise any quick or easy solutions or secrets, but rather emphasizes the importance of discipline, patience, and learning. FAQs

Here are some of the frequently asked questions about the book and their answers:

- Q: Who is the author of the book and what are his credentials? - A: The author of the book is Matthew R. Kratter, an Amazon best-selling author and a retired hedge fund manager who has over 20 years of experience in trading profitably. He has written several books on different aspects of trading, such as swing trading, options trading, day trading, candlestick patterns, etc. He also runs a website called Trader University where he offers free courses and videos on trading topics. - Q: What is the main purpose of the book and who is it for? - A: The main purpose of the book is to teach you how the stock market really works and how you can make money from it. The book is for anyone who wants to learn how to trade stocks effectively and efficiently, regardless of their level of experience or background. - Q: How long is the book and how much do