Hi Trader,

Here is Part 2 of our free report that you requested:

10 Essential Ingredients You Must Have To Make Money Trading Stocks Copyright ? 2008 Third Shift Publishing

Part 2 of 2

In Part 2, we’ll review each of the 10 essential ingredients from Part 1 of our report and we’ll provide a solution to add each one into your stock trading.

Ingredient #1: Clear objectives, a plan.

When you’re trading stocks you need to have clear objectives. There should be a good reason why you’re trading a specific stock.

You can not pick stocks to trade by throwing darts at a dart board, hoping that you pick a winner. You may get lucky once or twice using that method, but it’s not something that you can sustain over the long term.

Also, avoid “hot stock tips” from your relatives, friends and co-workers. This is usually a quick and easy way to lose money.

Before you trade a stock, you should have a clear reason why you are going to buy the stock and why you are going to sell the stock. You need a plan, a systematic approach to trading stocks.

Solution:

This first ingredient is very important. There are more than 7,000 companies listed on the stock exchanges. How do you know which stocks to trade? How do you know when to buy a stock and when to sell a stock?

To accomplish this, you need a plan. You need a method for trading stocks. For the purposes of this report, we’ll define a “method for trading stocks” or a “trading method” as a trading strategy, a trading system, or stock picks.

What do these methods have in common? They all have a plan for trading stocks. They have clear objectives. They have reasons why you will trade a stock.

There are plenty of trading strategies, trading systems and stock picks out there. Find one that you are comfortable with and use it.

Of course, we hope you select our trading system, the Tailwind Trading System (shameless plug!), because it fulfills this first ingredient. It has clearly defined objectives and provides a systematic approach to trading stocks.

However, you don’t have to choose our system.

The point is, you have to choose something. You have to choose a plan.

So, put away the dart board. Don’t select stocks using that method. And the next time your brother-in-law says he has a hot stock tip, tell him “No, thanks”.

Ingredient #2: Money management techniques.

When you’re trading stocks, you need to manage your money properly so the market doesn’t eat up all of your money in one swoop.

You also need to allocate your money into trades properly.

This is a very common mistake that people make when they’re trading stocks. They’ll just put some money into that trade and maybe they’ll put twice as much into that trade and maybe they’ll put a little bit into that trade. It’s a very haphazard approach and it doesn’t help them succeed in the market.

They treat the stock market like they’re shopping in a department store. “I think I’ll buy some of that stock, and I could use some more of that stock …” You get the picture.

Deciding how to allocate your money into trades is something you should do before you begin trading stocks.

Maybe you never considered how important money management techniques are for stock trading, but without managing your money and trading properly, you limit your chances of success in the stock market.

Before you begin trading, you should be able to answer these questions:

How many trades should I put my money into?

How much money should I put into each trade?

What do I do with the money that I have after I complete a trade?

Solution:

Similar to Ingredient #1, when it comes to money management, you need a plan. Everyone’s financial situation is unique, so you’ll have to base your money management efforts on your financial situation and what works best for you.

The first place to start to come up with a money management plan is to look at the method for trading stocks that you are using. Remember, we are defining a “method for trading stocks” as a trading strategy, a trading system, or stock picks.

Some of these methods use money management techniques as part of the overall trading plan for that trading strategy, trading system or stock picks.

That is usually the best approach to take because then you know that the money management techniques that you’re using go hand in hand with the strategy, trading system or stock picks that you’re using, thereby increasing your chances of overall success trading stocks.

For example, the Tailwind Trading System uses a money management technique that has been fine tuned to work with the system. We ran the trades through computer simulations and found the best way to manage the money properly for our system. It’s one of the keys that makes our system successful. You’ll know how many trades to put the money into, how much money to put into each trade and what to do with the money that you have after you complete a trade.

When you’re choosing a method for trading stocks, consider one that includes a money management technique as part of the overall plan. You will have a much better chance of success.

Without a proper money management technique, a very good strategy, system or stock picks can become average or even below average.

Ingredient #3: Limit downside risk.

Stock trading always involves the risk of loss. You will have losing trades, that’s part of stock trading.

If you don’t take steps to limit your downside risk, you can suffer serious financial losses. One or two mistakes in this area can cause significant damage to your brokerage account.

A common mistake that traders make is holding a losing stock for too long, hoping that it will recover. Instead of recovering, the stock continues to decline and the loss becomes much worse. (Ok, everyone who has done this, raise your hand!).

If you can limit the losses on the losing trades, the winning trades will take care of themselves.

Before you enter a trade, you should know when you’re going to get out of the trade if it’s a losing trade.

Solution:

One of the easiest ways to limit your downside risk is to use stop losses. After you buy a stock, you place a stop loss below it. If the trade is a losing trade, your loss will be limited to where you have placed the stop loss.

Of course, you will need to know where you should place the stop loss after you buy a stock.

Guidance for setting stop losses with your trades is usually included with a trading strategy, trading system or stock picks. The guidance will be tailored for the method of trading stocks that you’re using.

For example, the Tailwind Trading System uses a stop loss for each trade. The stop loss is set 20% below the buy price. This stop loss setting has been determined to be the best for our system.

Other methods for trading stocks may use a 15% stop loss or perhaps a 10% stop loss. This will all depend on the specific details about how a specific strategy, system or stock picks are intended to be used.

The important point is that a stop loss is used. You will know what your downside risk is before you enter the trade. This means there will be no unexpected or catastrophic losses.

When you’re considering different methods for trading stocks, look for the use of stop losses as an integral part of the overall plan.

The peace of mind this can bring to your trading can be priceless.

Ingredient #4: Proven track record.

When you’re trading stocks, every advantage you have increases your chances of success in the stock market.

One advantage that you certainly want to add into your stock trading is a proven track record of success.

While past performance is never a guarantee of future results, a proven track record will show you how a method for trading has performed over time, in good markets and bad markets. In a track record, you can find details such as an overall winning percentage, total number of trades, and specific details about each trade.

The track record can be used like a barometer to measure the performance of a trading strategy, trading system or stock picks, much like the market indexes are used to measure the performance of the stock market.

Solution:

As we mentioned earlier in this report, there are plenty of trading strategies, trading systems and stock picks out there. How do you know if one may be better than another? How do you know if one is better suited for your trading style or your schedule?

You can look at the track record. A stock trading track record is similar to looking under the hood of a car and checking its engine. It can tell you some things about a trading strategy, trading system or stock picks.

The method for trading stocks and the way that method is intended to be used can determine the type of track record that you will find for a trading strategy, trading system and stock picks.

A case in point, our Tailwind Trading System is a very systematic and methodical approach to trading stocks, which provides us with a lot of data points. We are able to show the overall track record, showing the overall winning percentage, and we are able to show the detailed track record, showing each trade in full detail. Also, because we have incorporated a money management technique into the system, we are able to show the performance of our system using various amounts of money as a starting portfolio, including the total number of trades, and as a result, we are also able to graph the performance of our system versus the major stock market indexes.

You may not find similar types of data with a different trading method, like stock picks.

Compare track records and look for something that you are comfortable with. Consider your goals and what you hope to achieve in the stock market. Keep in mind that past performance does not guarantee future results.

Ingredient #5: Do not trade stocks with your emotions.

When you trade stocks, you must learn to do so without letting your emotions get to you.

This is one of the most common reasons why stock traders fail. Too often, they are fearful of losing money because a stock they have bought has gone down instead of going up. Instead of seeing the trade to its conclusion, they will panic and sell the stock and take the loss.

If this has happened to you, don’t feel bad. It has happened at least once to every stock trader. It’s a normal human reaction. Fear of losing money is a very strong emotion.

The thing that separates the successful stock traders from the rest of the pack is that the successful traders have learned to tune out their emotions when they’re trading stocks.

Tuning out your emotions takes time and it’s essential if you want to make money trading stocks.

Solution:

Emotions are involved in every facet of life and financial matters are no exception.

Every stock trader wants to make money on every trade, but that’s not realistic. Don’t panic if you lose money on a trade, or if the stock you just bought goes down a few points. Don’t throw in the towel if the first trade that you make is a losing trade.

The first thing to do is turn off the TV where the so-called market experts report every up and down of the market as if the sky just fell. That kind of talk may increase their ratings but it doesn’t help you to be a successful stock trader.

Yes, it’s usually a good idea to know how the overall market is doing on any given day, just tune out all the excess nonsense. Focus on your stock trading and your plan.

The second thing to do is re-read Ingredients #1, #2, #3 and #4.

Yes, that’s right. Go back to the top of this report and re-read Ingredients #1, #2, #3 and #4 and the solutions.

Why?

Because if you have added these four essential ingredients into your stock trading, then there will be no need for your emotions to be involved with your trading.

If you have selected a “method for trading stocks” that you’re comfortable with, hopefully a method that has the word “Tailwind” in the title :-), that includes money management techniques, limits your downside risk and has a proven track record, then you have a solid plan to follow.

Trade using your plan, leave the emotions behind.

Ingredient #6: Defined entry and exit points.

You’ve decided to trade a stock. You’re ready to buy the stock but you hesitate. You say to yourself, “Should I buy it now? Should I wait until later in the day? Maybe I should wait until tomorrow.”.

Sound familiar. We’ve all done this.

This can be the difference between a winning trade and a losing trade. Not knowing when to enter a trade and when to exit a trade leaves you with those nagging questions “Should I buy now? Should I sell now?”

Those nagging questions begin to let your emotions back into your trading. That’s not good, see Ingredient #5.

You need to know precisely when to enter a trade and when to exit a trade.

Solution:

To add this essential ingredient into your stock trading, you need defined entry and exit points. They are a very effective way to make your stock trading more mechanical and take the emotions right out of the equation.

Some trading methods include defined entry and exit points as part of the overall plan, while some trading methods do not. This can separate the good trading methods from the not so good trading methods.

When you use defined entry and exit points, you will not be left scratching your head and wondering if you are supposed to buy a stock or sell a stock. This will eliminate any guesswork in your stock trading.

(Yes, our trading system uses defined entry and exit points, thanks for asking!)

Ingredient #7: Easy implementation.

Do you have 5 hours a day to look at stock charts? Not many of us do. Of course, maybe you like to spend all those hours staring at stock charts. Most of us do not.

In today’s fast paced world, you may be wondering if you have the time to trade stocks. This is a common problem for most of us.

Juggling jobs, families, activities, finances and everything else can take up a lot of time. What if you don’t have time to research that stock and determine if its time to sell it? When are you going to find the time to run that complex software or study technical analysis?

If only there were more hours in a day.

Solution:

Adding this essential ingredient into your stock trading is very easy.

If you don’t want to spend hours a day staring at stock charts, then don’t.

If you don’t want to use confusing technical analysis, then don’t.

If you don’t want to use complicated software, then don’t.

These are all choices that you can make. There are trading methods available, including our system, that do not use any of these time consuming ways to select and trade stocks.

You must first decide how much time you have available for trading. This may include how many hours each day or each week that you have available, what time of day you are available, and what days of the week you are available.

When you have a general idea of your available time, find a trading method that fits your schedule. You want something that you can easily learn and fit into your lifestyle.

Easy to use, fits your schedule and is profitable. Sounds like an ideal trading method, doesn’t it?

Ingredient #8: Ability to make profits in good and bad markets.

Many people think that you can only make money in the stock market when the market is going up. Of course, you know that stock traders can make money when the market is going good or the market is going bad.

You know that one way to make money when the market is going down is to short stocks. That’s not the only way however. Regular buy strategies can also work in down markets.

What we mean by making profits in good and bad markets is a trading method that will work in both types of markets.

People who get their financial information from the news media probably think that every time the Dow goes down 100 points everybody lost a fortune in the market.

Of course, you know that’s not true. Even when the Dow goes down 200-300 points in a day, there are stocks that have gone up that day.

Yes, it would be nice if the stock market only went in one direction - up, up, up. That would make stock trading so easy, wouldn’t it?

Solution:

To add this essential ingredient into your stock trading, you need to revisit Ingredient #4, a proven track record. As we mentioned earlier in this report, a track record can tell you some things about a trading method.

A track record can show how the trading method has performed in the past, during good markets and bad markets. Yes, by now you know the name of at least one trading method that has performed well in both types of markets.

The ability for a trading method to be successful in a good market and a bad market is what separates the very good trading methods from the average ones. When the stock market is soaring, even average and below average trading methods will make some money, but when the market turns bad, so do those trading methods.

If you use a trading method that will work in both types of markets, you won’t have to worry about which direction the market is going in.

Ingredient #9: Set realistic goals and only use risk capital to trade stocks.

So, you’re going to make a million dollars in just one month by trading stocks? And you’re going to start by taking next month’s rent money and put it into the stock market?

Not so fast.

We would all love to make a million dollars by next month. There’s nothing wrong with setting your goals high, but you need a dose of reality to go with them.

The stock market is a place where you need to have some common sense about you because if you don’t, it will knock some sense into you real fast.

That’s real money you’re playing with.

Solution:

There is no trading method that can turn you into a millionaire over night. It takes time and patience. You need to sit down and set some realistic goals about how much money you may be able to make with any given trading method.

Past performance is no guarantee of future results, but you can use a track record as a guide to help you map out how much money you may be able to make each year.

Don’t try to fool yourself into thinking that you can make a million dollars over night because then you will begin to make mistakes with your trading. And those mistakes can be very costly.

Follow the plan that you have selected.

When you’re trading stocks, you’re trading with real money, your money. If you lose it, you lose it.

Don’t use next month’s rent money to trade stocks. Use only risk capital to trade stocks.

Ingredient #10: Ability to make additional profits.

When a person works at a job, they expect to increase their pay each year with salary raises and bonuses.

Why should the stock market be any different?

There’s nothing wrong with using a second or third trading method to increase your stock trading profits. Getting more profits out of the stock market is like getting an annual bonus.

Solution:

When you use additional trading methods, you’re usually going to use methods that are completely different from each other. This provides a diversification to your trading activity.

For example, along with the Tailwind Trading System, we offer three additional trading methods, Penny Stock Castaways, M&A Profits and IPO Secret. This provides 4 completely different ways to make money in the stock market.

Using additional trading methods is a good way to boost your trading profits.

Add these 10 essential ingredients into your stock trading and you have a recipe for success!

Regards,

Michael Hoey Tailwind Trading System http://www.tailwindtradingsystem.com info@tailwindtradingsystem.com

Third Shift Publishing, 147 S. 3rd Street FL. 1, Telford, PA 18969, USA