Did you ever wonder why the same 5-10% of successful traders end out making most of the money in the long run? This includes the stock market, the commodities market, or any market that is traded. The reasons are many, and we will explore two of the key reasons in this article. If you properly implement these trading keys into your own trading, you will dramatically improve your overall results.


One of the main reasons traders or investors fail is they do not have a successful trading plan. Following a successful plan will give you an edge, each and every time you trade the markets. You want to have the odds in your favor each time you initiate a trade. As an example, this is what I do before taking a position in the futures market. I analyze trends, implement pattern recognition techniques, analyze seasonal tendencies, conduct historical price level analysis, check the current cash basis, and most importantly, I use sound money management. This means keeping all losses small. Preservation of your trading capital is a traders top priority.

Probably the number one reason, traders or investors are not successful,is because they do not understand proper trading psychology. Human nature plays a very important role in shaping all the markets that are traded. Its human psychology that causes the various patterns you see on a chart. It does not matter if the chart is a one minute chart or a monthly one. These patterns are created because of human nature, and human nature has never, and will never change. That is why the same patterns on a chart occur over and over again. Once you learn technical analysis, and can interpret these patterns correctly, you can make a fortune trading the markets. Many traders rely on hope or let fear and greed take over their trading. Once this happens, it is a certain recipe for disaster in your trading account.

You want to have as many factors as possible in your favor. That is your edge which you get from following a successful trading plan. I will never trade any market unless the odds are strongly in my favor. Then, if the market goes against me, I will get out with only a small loss. That is how fortunes are made trading the markets. Learn from great trading legends, past and present. This includes traders such as William J. O'Neil, Bernard Baruch, Gerald Loeb, Richard Dennis, Jesse Livermore and others. Read their books, study their methods and techniques. Once you can follow a successful trading plan, and implement proper trading psychology, you are well on your way to making a fortune.

Charts record a commodity or stock's price and volume history. If you can interpret these charts properly, they will help you determine whether a commodity or stock is strong, and under accumulation, or weak, and under distribution.


Traders and investors who educate themselves to properly read charts have a huge advantage over those who do not, for whatever reason. Put as many factors as possible in your favor before taking a position in the market. Reading charts, or technical analysis, is a key factor.

Chart patterns, which can also be called,"bases", are really just areas of consolidation or price correction after an earlier price advance or decline. There are several historically proven patterns that repeat themselves over and over. Learn what these patterns are, and learn to recognize them by reading charts.

Major trends occur off solid, recognizable price patterns. Fortunes are made by traders and investors who put in the time and effort to properly interpret charts. The reason these successful price patterns repeat themselves over and over is because of psychology. Human nature does not change, and it never will. You are seeing human nature recorded in charts. Understanding proper trading psychology, and reading charts, are keys to successful trading and investing.

A great way to see the future is by studying the past. Analyze the chart patterns of the most successful stocks, and the major commodity trends that have made fortunes, for those who interpret them properly. Remember, these price patterns on the chart were made by human nature in action, and human nature will never change.

A great way to begin your chart reading, or technical analysis education is by reading,"Introduction to Technical Analysis", by Martin Pring. Pring is a true expert in the field.

Stock prices advance when buyers are more enthusiastic than sellers. On the other hand, stock prices decline when sellers are more enthusiastic than buyers. Finally, if a stock stays in a narrow trading range for a while, it means buyers and sellers are about equal, when it comes to enthusiasm. It is interesting to note, there always has to be an equal number of shares sold when shares are bought, and vice versa. It is the enthusiasm of one side or the other that causes prices to advance or decline.


You are probably wondering why I choose the title I did for this article. Elephants are really big and they represent big institutions, such as hedgefunds, mutual funds, pension funds, and other large investment firms. These big institutions account for about 75% of all trading activity in the stock market. It takes huge demand for stock prices to make a significant advance. The biggest source of this demand is the institutions or elephants.

You can tell if institutions such as a mutual fund are accumulating shares of a company by price and volume analysis. Looking at a weekly chart, if the price went up for the week, and the volume was significantly higher than normal for the week, it means that big players in the market are accumulating shares. This is important because once a big fund establishes a new position, it usually will continue to add to that position for many weeks or more. This will really give the stock a boost when it comes to price advancement.

Following institutional sponsorship is an important factor in your overall stock market analysis. These elephants are the sustained force behind almost all major price moves. Knowing when these major stock market players are buying a certain stock, can do wonders for your overall trading results. I recommend reading, "How to Make Money in Stocks", by William J. O'Neil. This is a superb book covering all the important aspects of trading in the stock market. Knowledge is the key to trading greatness and making a fortune.

The first factor to analyze is the direction of the general market. Is the general market in an uptrend or downtrend? It is vitally important to only make new stock purchases with the general market in an uptrend. This is because 75-80% of all stocks follow the general market direction. This includes leading stocks.


Once you establish the general market is in an uptrend, now it is time to dig a little deeper and find out what industries are leading the market. The best way I know to determine this, is by checking the Industry Sub-Group Rankings with Investors Business Daily. IBD ranks 197 industry groups.

It is best to only buy stocks in the top 40-50 industry groups. Better yet, check to see if the industry group you are interested in, has been getting stronger the past few weeks and months. This is also a plus.

Next, based on fundamentals and technicals, you want to find the very best stocks from one of the top industry groups. The top few stocks in a strong industry group can produce fantastic profits. These leading stocks will have strong earnings and sales.

The reason it is important to buy leading stocks from top ranked industries, is because about 50% of a stock's ultimate price advance is directly related to its industry group and sector.

At the beginning of a new general market uptrend, the first stocks that bounce back to new price highs are usually the new leaders of this emerging market cycle. The very best leading stocks tend to come out in the first few weeks or so.

There are other important factors to consider when buying stocks, but industry group analysis is certainly a major one. I recommend reading, "How to Make Money in Stocks", by William J. O'Neil. This book is certainly one of the best stock market books ever published and much can be learned from it.