Here are 6 ways to improve your stock trading in 2010.

1. Diversify

One of the key factors that led to the success of my ‘4 stocks to buy in 2009′ was diversification. With passing years come new trends, and, within each year, sectors can boom at different times. By gaining the exposure to different environments will not only lead to better overall returns, but it also limits our risk at the same time.

• How To Diversify Your Portfolio

2. Asset Management

Its amazing how many different investment vehicles there are nowadays. They all have there own pros and cons and individual reasons for using one. For example, you have stocks, bonds, mutual funds, ETFs, retirement accounts, and so on. See what kind of plans your brokerage and/or employer offer.

• How To Diversify Your Portfolio Using Different Asset Classes
• How To Build A Quality Portfolio

3. Examine Your Trading Strategy

With all the noise and media coverage, it is very easy to get distracted from your current trading strategy. Maybe the strategy you’re using right now isn’t meant for you. Examine your strategy and see if it is working for you. Are you looking to minimize your risk? Do you want larger returns? Perhaps you prefer to use technical analysis over fundamental analysis. Whether you just need to focus back on the basics or alter your trading style, make sure you do this before completely blowing up your portfolio.

4. Plan Ahead

As any trader knows, you must be able to read and react to be successful in the stock market; however, sometimes this can be made easier by planning ahead. If you think oil will be strong in late summer, then keep possible related stocks on your watch list, so you’re well aware of how they move before its time to actually buy some.

5. Keep A Trading Journal

Its amazing how much you can learn from previous trades or stocks that have been kept on your watch list. What is even more amazing is how many people don’t track this and conduct the same mistakes over and over again. If you’re not already, consider starting a trading journal. Track dates, current stock price, future price targets, and what actually happens. Then every quarter (or as many times as you deem necessary) review the journal and see what change(s) can be made to improve your trading.

• Trading Journal (Template)
• Trading Journal Do’s and Don’ts

6. Learn Something New

What makes the best athletes stand out from the rest is that every season they add something new to their game. Why not take a page out of their book? Learn something new. A trading strategy, some form of fundamental analysis, learn how to short stocks, etc. Even if you end up not using it too much, you’ll broaden your overall knowledge of the market by doing so.

Believe it or not there are actual practices and studies now that look at how to measure the mood in the social setting to determine potential trends in the market.

Wall Street legend and best-selling author Robert Prechter says “You can almost hear the Dow going up and down over the airwaves.” Watch this 3-minute clip from his documentary History’s Hidden Engine to see how social mood governs movements in the stock market and trends in popular culture.

There are also a lot of good songs in the video.

Then access his 50-page report “Popular Culture and the Stock Market” FREE.

Access Robert Prechter’s 50-page report “Popular Culture and the Stock Market” FREE!

You’ll remember that last week we looked at 10 stock picks that were made at the beginning of this decade and how those turned out (not so good).

Compare those stock pick results with the actual top performers and you’ll notice the huge disparity.

Top 10 Stocks Of The Past Decade

A couple things to note about the list:

• Energy and Consumer led way to with 2 stocks each; however, was spread around many sectors.
• 9 out of 10 stocks trade on volume less than 1 million today, with many under 500k.

Basically if you’re looking to try and find one of the best performing stocks for the next decade, then you’ll need to dig into the small caps, and well… find a needle in a haystack.

Remember that these case-studies are to see if stock trading can really be this easy.

While you might not always see such immediate results, the answer is yes! Technical analysis allows us to execute trades only when a stock has made some sort of confirmation. This drastically reduces the risk of trading.

You can see the below and after charts below…

Before

In the initial analysis of JA Solar (JASO) we were looking for a bounce off the 200-day moving average SMA (red line).  Both the MACD and RSI were in neutral positions (marked by blue arrows).

If the stock dipped below the 200 SMA, then that would trigger a sell symbol. A bounce higher would obviously be taken as a bullish signal to buy or continue holding if you already have shares.

After

You can see following the initial analysis (October), JASO jumped higher. While you could have sold and taken profits, many people prefer to hold longer or until a trend is broken. In this case, the trend we are looking at is to remain above the 200 SMA.

Over the next 2 months, JASO consistently found support at the 200 SMA, which lets us know that the current trend is still intact. By remaining to hold until the trend tells us otherwise, we were able to catch JASO on the move from $3.70 to $5.00. A nice 35% gainand you didn’t have to do anything.

So there you have it. By holding on until the trend tells us otherwise we were able execute minimal trades, yet still come out with double digit gains. To learn what to do with this stock at this point and other technical patterns and indicators check out Chart Pattern Manifest.

A popular technique many advanced and professional traders use is trend trading. Basically you analyze securities based on dependent markets, sectors, or other securities. By throwing in unique indicators, such as differences and next day predictive highs and lows, traders can vastly increase their trading results.

I had no idea they were doing this, but INO released a cool new online video trading platform to help you learn how to trade trends. As a TWI reader you’ll get access to 4 free videos:

• VIDEO 1 Basic Indicators to Analyze Markets
• VIDEO 2 Using Predicted High and Predicted Low to Trade Intraday
• VIDEO 3 Strategy Trading Using Next Day Predictive Highs and Lows
• VIDEO 4 Using “Differences” to Spot Shifts in Momentum

You can watch these videos over at Trend TV.

They recently posted their “Ten Laws of Technical Trading” which anybody interested in technical analysis should read. An excerpt is listed below.

1. Map the Trends

Study long-term charts. Begin a chart analysis with monthly and weekly charts spanning several years. A larger scale map of the market provides more visibility and a better long-term perspective on a market. Once the long-term has been established, then consult daily and intra-day charts. A short-term market view alone can often be deceptive. Even if you only trade the very short term, you will do better if you’re trading in the same direction as the intermediate and longer term trends.

2. Spot the Trend and Go With It

Determine the trend and follow it. Market trends come in many sizes – long-term, intermediate-term and short-term. First, determine which one you’re going to trade and use the appropriate chart. Make sure you trade in the direction of that trend. Buy dips if the trend is up. Sell rallies if the trend is down. If you’re trading the intermediate trend, use daily and weekly charts. If you’re day trading, use daily and intra-day charts. But in each case, let the longer range chart determine the trend, and then use the shorter term chart for timing.

3. Find the Low and High of It

Find support and resistance levels. The best place to buy a market is near support levels. That support is usually a previous reaction low. The best place to sell a market is near resistance levels. Resistance is usually a previous peak. After a resistance peak has been broken, it will usually provide support on subsequent pullbacks. In other words, the old “high” becomes the new low. In the same way, when a support level has been broken, it will usually produce selling on subsequent rallies – the old “low” can become the new “high.”

4. Know How Far to Backtrack

Measure percentage retracements. Market corrections up or down usually retrace a significant portion of the previous trend. You can measure the corrections in an existing trend in simple percentages. A fifty percent retracement of a prior trend is most common. A minimum retracement is usually one-third of the prior trend. The maximum retracement is usually two-thirds. Fibonacci retracements of 38% and 62% are also worth watching. During a pullback in an uptrend, therefore, initial buy points are in the 33-38% retracement area.

5. Draw the Line

Draw trend lines. Trend lines are one of the simplest and most effective charting tools. All you need is a straight edge and two points on the chart. Up trend lines are drawn along two successive lows. Down trend lines are drawn along two successive peaks. Prices will often pull back to trend lines before resuming their trend. The breaking of trend lines usually signals a change in trend. A valid trend line should be touched at least three times. The longer a trend line has been in effect, and the more times it has been tested, the more important it becomes.

6. Follow that Average

Follow moving averages. Moving averages provide objective buy and sell signals. They tell you if existing trend is still in motion and help confirm a trend change. Moving averages do not tell you in advance, however, that a trend change is imminent. A combination chart of two moving averages is the most popular way of finding trading signals. Some popular futures combinations are 4- and 9-day moving averages, 9- and 18-day, 5- and 20-day. Signals are given when the shorter average line crosses the longer. Price crossings above and below a 40-day moving average also provide good trading signals. Since moving average chart lines are trend-following indicators, they work best in a trending market.

7. Learn the Turns

Track oscillators. Oscillators help identify overbought and oversold markets. While moving averages offer confirmation of a market trend change, oscillators often help warn us in advance that a market has rallied or fallen too far and will soon turn. Two of the most popular are the Relative Strength Index (RSI) and Stochastics. They both work on a scale of 0 to 100. With the RSI, readings over 70 are overbought while readings below 30 are oversold. The overbought and oversold values for Stochastics are 80 and 20. Most traders use 14-days or weeks for stochastics and either 9 or 14 days or weeks for RSI. Oscillator divergences often warn of market turns. These tools work best in a trading market range. Weekly signals can be used as filters on daily signals. Daily signals can be used as filters for intra-day charts.

8. Know the Warning Signs

Trade MACD. The Moving Average Convergence Divergence (MACD) indicator (developed by Gerald Appel) combines a moving average crossover system with the overbought/oversold elements of an oscillator. A buy signal occurs when the faster line crosses above the slower and both lines are below zero. A sell signal takes place when the faster line crosses below the slower from above the zero line. Weekly signals take precedence over daily signals. An MACD histogram plots the difference between the two lines and gives even earlier warnings of trend changes. It’s called a “histogram” because vertical bars are used to show the difference between the two lines on the chart.

9. Trend or Not a Trend

Use ADX. The Average Directional Movement Index (ADX) line helps determine whether a market is in a trending or a trading phase. It measures the degree of trend or direction in the market. A rising ADX line suggests the presence of a strong trend. A falling ADX line suggests the presence of a trading market and the absence of a trend. A rising ADX line favors moving averages; a falling ADX favors oscillators. By plotting the direction of the ADX line, the trader is able to determine which trading style and which set of indicators are most suitable for the current market environment.

10. Know the Confirming Signs

Include volume and open interest. Volume and open interest are important confirming indicators in futures markets. Volume precedes price. It’s important to ensure that heavier volume is taking place in the direction of the prevailing trend. In an uptrend, heavier volume should be seen on up days. Rising open interest confirms that new money is supporting the prevailing trend. Declining open interest is often a warning that the trend is near completion. A solid price uptrend should be accompanied by rising volume and rising open interest.

“11.”

Technical analysis is a skill that improves with experience and study. Always be a student and keep learning.

…and if you really want to keep learning and improve your trading, while learning simple technical analysis techniques, then check out Chart Pattern Manifest.

Its been a while since we looked at a host of stock charts at one time, so lets look at where some of our favorites stand.

Netflix – NFLX

I tweeted this stock earlier and it did exactly what I said. As part of my 4 stocks to buy in 2009, I am obviously rooting for Netflix (NFLX) to finish the year strong. Looking at the charts, the stock is sitting at a point of support and actually closed below the line with MACD pointing down. Look for further confirmation of open and close below support before considering short-term trend change.

JA Solar Holdings – JASO

I’ve been following and holding this stock for a couple months now, and paid off nicely today. JA Solar (JASO) basically smashed through multiple level of resistances with larger than normal volume and managed to close above the line. Both MACD and RSI are pointing up, but nearing oversold levels. Keep support at $4.83.

AK Steel – AKS

It seems like AK Steel (AKS) has resembled that of a broken record over that last couple of months as it keeps going up and down, although it makes it easy to trade. Look for a possible cup and handle formation taking place, which could launch this stock into the mid-20s.

Learn more chart patterns and technical indicators.

China North East Petroleum – NEP

China North East Petroleum (NEP) has been the complete opposite of a fast mover. That being said, it looks like NEP might have finally got its stride going has it basically just zoomed past the $5’s into the $6’s. Look for a support level of $5.80.

Apple – AAPL

The stock recently created a scare by the financial community as it dipped below the 50 SMA, but now we’re facing an even more critical support level at $187.50. Both MACD and RSI are pointing down. I think support will be able to hold and we’ll be confirmed on the current trading zone the stock is in.

Amazon – AMZN

As part of my 7 retail stocks to get a boost this holiday season, Amazon (AMZN) has been on a tear over the last 3 months going from $80 to $145. Whether the current down movement is do to just a mini pullback or end of current trend is yet to be seen, but we should get some idea with the support around $135.

By looking at the overall U.S. market returns YTD, it would seem that we’ve definitely made heavy strides in the right direction, but then again what are we compairing them to…2008?

I’m a constant pusher in the belief that most, if not all, of the gains made in 2009 are largely due to acceptance and adapting of our current conditions: businesses took on lower inventory, households started saving more and spending less, and, quite frankly, we can only be in panic mode for so long.

Is the worst behind us? Perhaps, but look at all the problems we still have today. The U.S. wants to ship off more troops, oil is expected to rise, and unemployment is astronomically high at around 10%. Forget about seeing any major improvements until we can make a dent there. According to the jobs report, 5.9 million people have been out of work for 27 weeks and are still actively looking for a job. That’s more than half a year. As those weeks continue to build up, consumer spending will take even further declines and households tightening up their money even more.

Chain-store same-store sales are down 3.5% in November, the largest decline since December 2007, which again is an effect of unemployment. Of course, this is all relatively great news for discount retailers and wholesale clubs.

See: 7 retail stocks poised for big a holiday season

Nonetheless, when the holiday season is all said I think those numbers will give us great insight into where the economy actually is as a country and what direction we could see for 2010.

Generally, at the beginning of decades analysts of all different niches try to forecast what should be 10 years from now. That being said, I decided to do some research and dig up some stock picks that came out 10 years ago in regards to stocks that you could hold for 10 years.

I came across an intersting article from the NY Times, 10 Stocks for 2010: Buy-and-Hold Picks From Top Investors, so lets look at how these stocks actually performed 10 years later.

In all fairness, picking stocks that should do good 10 years out is definitely not an easy task. Especially considering all the tragic and unforeseen events that happened during this decade; nonetheless, you’ll see that some of these picks just didn’t fare well at all.

Here’s what the initial NY Times article was looking at…

What we’ve done is to ask 10 very smart, very successful investment professionals to pick one stock each — a stock that barring an act of God or some unforeseeable geopolitical disaster they would feel comfortable buying now and holding until Jan. 1, 2010.

Given the track records of the participants, however, when the time comes to look back, the odds are that the bulk of these companies will have qualified as good long-term investments.

As a quick summary, out of the 10 stocks, only 2 managed to come out in green while more than half resulted in worse than -20% returns. A key pattern in many of these stocks were initial 2-3 years of marginal gains followed by slow and steady downtrends.

1. Oracle (ORCL) -10%

”By traditional measures, the stock is not cheap,” he acknowledged. ”But if you are looking at a 10-year hold, the current valuation parameters won’t matter. If their earnings can grow significantly, the multiple will be far less” in 2010.

Oracle peaked around $45 in 2001 and subsequently came crashing down to under $7 not to far after. Since 2002, the stock has been on a very gradual uptrend; however, its safe to say the high flying expectations of this company from the initial analysis of John Ballen has subdued a little bit.

2. Nokia (NOK) -72%

”These people have the ability to come out with new products,” he said of Nokia. ”In Europe, cell phones are almost as ubiquitous as car keys. As the third world develops, that is going to be a huge market.

What was somewhat surprising of this stock pick was that going into the year 2000, Nokia was experiencing a massive 200+% gain over 1999. In my opinion, I would expect a stock to do that well over 10 years with that kind off that kind of return. While Nokia had taken the global approach has desired by Laszlo Birinyi, other companies have jumped into the mobile phone game and stolen some of the market share.

3. Medtronic, Inc. (MDT) -4.66%

”It is the leading implantable medical device company in the world today, and has been for 25 years,” Mr. Mairs explained. ”They have an exceedingly strong franchise — one that is so strong that they have added to their product line by buying other companies.”

Medtronic has basically been trading between the $40-60 trading range, until mid-2008 when the stock plummeted just like rest of the market. It has since bottomed out, and could come into green before 2009 is over if the stock heads over $46.

4. Flextronics International Ltd. (FLEX) -68%

”We have owned Microsoft and Intel for much of the last decade, and Oracle for most of that time,” he said. ”Their common characteristic is that they were all positioned in front of very large business opportunities.”

Flextronics pretty much fizzled as quickly as the decade started after hitting its peak in mid-2000, and continuing to decline ever since. I think the decline came as part of the popping of the Internet bubble in the early 2000’s followed by using antiquated ideology from the 90’s that just didn’t carry over.

5. Henry Schein, Inc. (HSIC) +667%

”We need more and more dental care, not only in the U.S. but worldwide,” Mr. Nasgovitz explained. Yet the stock, which traded for $53 in mid-1998, is now selling at about $13. ”It hasn’t participated in this rally at all,” he said.

Mr. Nasgovitz figures that catering to the aging teeth in mouths all over the world should increase Henry Schein’s revenues by 15 percent a year through the decade.

By far the best returns seen by any stock in this list, Henry Schein has been on an uptrend ever since the decade started; however, it looks like 2010 can’t come soon enough as the trend looks to be over.

6. Waste Management (WM) +89.57

The fact that few competitors are out fighting Waste Management to haul garbage is an important consideration when making a long-term investment, Mr. Miller said. ”You want a business that is relatively insulated from competition, where the barriers to success are high,” he said. ”It is very difficult to build a dominant waste management company.”

Waste Management took off all the way from the start, and actually still doesn’t see any signs of stopping and any major competition. A stock for 2020???

7. JDS Uniphase Corporation (JDSU) -99.07

”It is the marriage of a great company and great management with great industry fundamentals,” Ms. Sonders said. ”At a minimum, the fiber optic component market is expected to quadruple in size over the next three years. The only hindrance is that there is too much demand.”

Definitely the worst performing stock of this list. In late July 2001, JDSU was part of the largest (up to then) write-down of goodwill and business losses in business history: $45 billion, which basically screwed the company. JDS Uniphase dipped from over $1,000 to under $20 in just 2 years. Not to mention this all happened in the first 2 years of the decade. Since than the stock has only continued to head lower and sits below $10.

8. Zee Telefilms -

Couldn’t find much information about this stock, other than it is on the Bombay Stock Exchange and has to do with the Bollywood film industry.

9. Cisco (CSCO) -56.41

Over the next 10 years they many not have the highest appreciation, but in terms of pure risk/reward, Cisco is the stock I feel most comfortable with,” he said. ”They understand where the marketplace is going and are making sure they are going to be a leader.”

Cisco, a favorite of most in the 90’s, never really carried its swagger into the millennium. Between 1998 – 2000, the stock saw a 300% return only to see it all get erased before 2001 even started. Since than Cisco has pretty much not moved at all.

10. Jones Apparel Group, Inc. (JNY) -24.32

”It’s a well-run company,” he said. Plus, ”I think women will be wearing clothing 10 years from now, and Jones Apparel will be making their fair share of those clothes.”

Choosing an apparel company is certainly interesting for a decade long pick. Understandably Jones Apparel may have come out in the green if it wasn’t for the extreme credit crunch. Then again, another reason picking retail would be interesting.

What we can learn from this

While we can pick stocks that will do good over a year or two, trying to find stocks with a 10 year time frame is like find a needle in a haystack. There will always be unforeseen incidents that make the original term of buy and hold trading somewhat outdated and inefficient.

The markets have completely changed from the 80’s and 90’s, and have not created a conducive environment for decade long holdings.

Some trends noticed for picking long-term stocks:

• If a sector as a whole is experiencing a boom towards the end of a decade, expect it to crash in the next decade.
• Choosing stocks with 100+% returns leading up to the decade will not be able to continue that trend 10 years down.
• Finding companies that have stabilized themselves in a niche with little competition should benefit them in the long run.

What do you think of long-term buy and hold strategies?