Member Mailbag

A number of very good questions were sent in by members. Topics I will cover in this week's mailbag include:

• Learning How To Lose

• Improvements With Premarket Gainers & Losers Post

• Backtesting a Relative Strength Screen

• How to Filter/Tweak Your Stock Screens

• Methods To Avoid Trading Bias

• Using Insider Buying As A Leading Indicator

• Sources For Trader Tax Advice

• Overbought/Oversold Telechart Indicator

• My Honest Opinion of Jim Cramer

• Value Stocks & The Presidential Cycle

• S&P 500 Head & Shoulders Projections

• Sources For Economic Reports & Earnings Guidance

• Progress On My 2008 Transition

Q:   I have to confess a major flaw in my trading - I have never shorted any equity! I know you have said to trade well one must learn how to short and suggested learning the short trade before trading long. This is my question. When you are setting up short trades, is it basically the inverse of the long ones that you look for? All things considered, are you looking for the opposite set up or is there something more fundamental I am missing?

A:  I do believe there is great value to learning both sides of the market. In recent years, with the bearish ETFs that have come out, more people are getting comfortable with using short-sell positions. That said, this question reminds me of a very important post I shared last March. In that post, it was suggested that new traders should open up a paper trading account (a simulated portfolio with no real money in play). After you do that, then you should try to lose all of your money as quickly as possible. Strange as it may sound, you'll find losing your money to be more difficult than you may think. (I've since tried doing this myself and I learned a few things that I didn't realize before). Funny thing about trading - once you learn how to lose, you often can gain the right skills to know how to win. That's why simulated and paper trading can be so important as a teaching tool for new traders.

Please click here to read the rest of this week's mailbag.