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Monday, October 27, 2008
Friday, September 19, 2008
SEC Bans Short Selling!
The U.S. Securities and Exchange Commission on Friday banned short-selling in 799 financial companies, "to protect the integrity and quality of the securities market and strengthen investor confidence," according to a statement from the SEC. SEC Chairman Christopher Cox said: "The commission is committed to using every weapon in its arsenal to combat market manipulation." The ban expires Oct. 2.
Thursday, September 18, 2008
Resolution Trust Corp. (RTC) Explained
This is an article from 1992 that I thought did a pretty good job of explaining the RTC (Resolution Trust Corporation), which has received a good deal of attention after an announcement today by Treasury Secretary Hank Paulson sparked a massive rally in the stock market:
In many respects, the sun is setting for the Resolution Trust Corp. (RTC). Its massive task has been to salvage the nation's ailing savings and loan industry, a task it expects to complete by 1996. But for African American-owned businesses, with the capability and desire to compete for the billions in contracting fees, the sun is rising.
Last March, offical clout to ensure that all segments of U.S. business participate in the largest disposition of property and other assets grew. (See "The World's Biggest Fire Sale," June 1991.) The push was given by an impatient Congress and by a new RTC president and CEO. How? The RTC consolidated and expanded its minority outreach program increased cost advantages for minority firms in the bidding process and promulgated new rules to substantially increase the share of minority-awarded business contracts in fields as diverse as accounting and law.
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As of March the RTC had disposed of more than $234.1 billion in assets that belonged the 630 savings and loans. It spent $81.5 billion of the taxpayers' money in the process. This created a bonanza of $1.87 billion in fees awarded in 60,226 service contracts. Though the RTC's authority expires in 1996, between now and then, it is expected to authorize some $15 billion or so in contracting service fees.
These days, minority businesses are in the thick of the action. Nine black companies or joint-venture shares placed among the top 100 RTC contractors receiving fees in excess of $4 million. But minority firms' share of the total was still small as black-owned firms received only $80.2 million in fees of the $1.87 billion total. Black law firms earned only 1% of legal fees generated and Hispani-owned firms took in an even smaller $39.2 million in total fees. Other minority groups trailed further behind.
Why minorities have had a problem getting equal representation is embedded in RTC history. The RTC was created after the passage of the 1989 Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), which aimed to stabilize the struggling thrift industry. The RTC was charged with managing thew real estate and securities of insolvent thrifts. From the beginning, Congress felt that minority participation was important enough to write it into law. As passed, FIRREA required RTC to "prescribe regulations to establish and oversee a minority outreach program...to ensure inclusion, to the maximum extent possible, of minorities and women and entities owned by minorities and women." Yet minority firms were left at the starting gate.
During its first two years, with real estate in a tailspin, the main task of RTC official was getting contracts out before the assets they managed depreciated further. The key to private contracts' participation was RTC registry. Once registered, contractors could get "SOSs" or solicitations of services telling them which properties were up for RTC management, disposition or other services. In most instances large, white-owned firms got the largest contracts. Albert V. Casey, current RTC president and CEO says, "We had to get control of the situation. We thought it would be 50 savings and loans at first and that grew to more than 500. Originally we were just going willy-nilly out there, and there wasn't time and there weren't a lot of minorities registered."
That neglect is reflected in the numbers: In June 1990, there were only 500 registered minority- and women-owned firms. By January 1991, 4,320 minority-owned firms out of 40,577 firms were registered. That year, minority-owned companies were awarded only 7.5% of the contracts, worth $12.4 million. Firms owned by white men were awarded 80.2% of the contracts, followed by firms owned by white women, with 12.3%.
Last September, the General Accounting Office (GAO) completed an investigation clearly stating where responsibility lay: "The RTC got off to a slow start in implanting a minority- and women-owned business program for asset management contracting." The GAO found a persistent pattern of understaffing and underfunding of RTC minority efforts. One year ago, the RTC outreach office at its Washington headquarters consisted of a director and one secretary. The GAO also said minority programs at the RTC were "inconsistent."
Others said they were ignored. Minortiy-owned firms complained they were neither notified when contracts were to be let nor were they contracted by larger corporations that were supposed to be cuscontracting with them. Ralph C. Thomas III, the executive director of the National Association of Minority Contractors says this proves, "the old boy network is still alive."
But hat has begun to change. Under fire from Congress, civil rights groups and the Rainbow Coalition, the RTC has consolidated its various minority programs under one roof: the Minority and Women Outreach and Contracting Programs, headed by an African-American Johnnie B. Booker, who was a Housing and Urban Development deputy assistant secretary of Operations and Management for the office of Fair Housing and Equal Opportunity. Since joining the RTC last November, Booker's Staff has expanded from one professional to eight. And it wasn't long before she heard from her constituency. They told her one thing: "'Give us more contracts!' That was the song we heard," she says with a chuckle. "And we're planning to move very aggressively in that direction."
In many respects, the sun is setting for the Resolution Trust Corp. (RTC). Its massive task has been to salvage the nation's ailing savings and loan industry, a task it expects to complete by 1996. But for African American-owned businesses, with the capability and desire to compete for the billions in contracting fees, the sun is rising.
Last March, offical clout to ensure that all segments of U.S. business participate in the largest disposition of property and other assets grew. (See "The World's Biggest Fire Sale," June 1991.) The push was given by an impatient Congress and by a new RTC president and CEO. How? The RTC consolidated and expanded its minority outreach program increased cost advantages for minority firms in the bidding process and promulgated new rules to substantially increase the share of minority-awarded business contracts in fields as diverse as accounting and law.
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As of March the RTC had disposed of more than $234.1 billion in assets that belonged the 630 savings and loans. It spent $81.5 billion of the taxpayers' money in the process. This created a bonanza of $1.87 billion in fees awarded in 60,226 service contracts. Though the RTC's authority expires in 1996, between now and then, it is expected to authorize some $15 billion or so in contracting service fees.
These days, minority businesses are in the thick of the action. Nine black companies or joint-venture shares placed among the top 100 RTC contractors receiving fees in excess of $4 million. But minority firms' share of the total was still small as black-owned firms received only $80.2 million in fees of the $1.87 billion total. Black law firms earned only 1% of legal fees generated and Hispani-owned firms took in an even smaller $39.2 million in total fees. Other minority groups trailed further behind.
Why minorities have had a problem getting equal representation is embedded in RTC history. The RTC was created after the passage of the 1989 Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), which aimed to stabilize the struggling thrift industry. The RTC was charged with managing thew real estate and securities of insolvent thrifts. From the beginning, Congress felt that minority participation was important enough to write it into law. As passed, FIRREA required RTC to "prescribe regulations to establish and oversee a minority outreach program...to ensure inclusion, to the maximum extent possible, of minorities and women and entities owned by minorities and women." Yet minority firms were left at the starting gate.
During its first two years, with real estate in a tailspin, the main task of RTC official was getting contracts out before the assets they managed depreciated further. The key to private contracts' participation was RTC registry. Once registered, contractors could get "SOSs" or solicitations of services telling them which properties were up for RTC management, disposition or other services. In most instances large, white-owned firms got the largest contracts. Albert V. Casey, current RTC president and CEO says, "We had to get control of the situation. We thought it would be 50 savings and loans at first and that grew to more than 500. Originally we were just going willy-nilly out there, and there wasn't time and there weren't a lot of minorities registered."
That neglect is reflected in the numbers: In June 1990, there were only 500 registered minority- and women-owned firms. By January 1991, 4,320 minority-owned firms out of 40,577 firms were registered. That year, minority-owned companies were awarded only 7.5% of the contracts, worth $12.4 million. Firms owned by white men were awarded 80.2% of the contracts, followed by firms owned by white women, with 12.3%.
Last September, the General Accounting Office (GAO) completed an investigation clearly stating where responsibility lay: "The RTC got off to a slow start in implanting a minority- and women-owned business program for asset management contracting." The GAO found a persistent pattern of understaffing and underfunding of RTC minority efforts. One year ago, the RTC outreach office at its Washington headquarters consisted of a director and one secretary. The GAO also said minority programs at the RTC were "inconsistent."
Others said they were ignored. Minortiy-owned firms complained they were neither notified when contracts were to be let nor were they contracted by larger corporations that were supposed to be cuscontracting with them. Ralph C. Thomas III, the executive director of the National Association of Minority Contractors says this proves, "the old boy network is still alive."
But hat has begun to change. Under fire from Congress, civil rights groups and the Rainbow Coalition, the RTC has consolidated its various minority programs under one roof: the Minority and Women Outreach and Contracting Programs, headed by an African-American Johnnie B. Booker, who was a Housing and Urban Development deputy assistant secretary of Operations and Management for the office of Fair Housing and Equal Opportunity. Since joining the RTC last November, Booker's Staff has expanded from one professional to eight. And it wasn't long before she heard from her constituency. They told her one thing: "'Give us more contracts!' That was the song we heard," she says with a chuckle. "And we're planning to move very aggressively in that direction."
Wednesday, September 17, 2008
Shame on you CNBC!
Ok, I am surely going to upset some people with this post, but as someone who watches, trades, analysis, and writes about the stock market as my main sources of income, I would like to inject my thoughts on the subject here, because while I too hate what the media does to get ratings, there is LOTS of cause for concern out there in this market.
First, let me qualify myself as someone who you might want to listen to - My grandfather was a stock broker and an options trader. My dad was a market maker turned private investor who has co-authored two books on swing trading equities. I have been studying the market since I was about 16, and actively trading since I was 18. I am 27 and have yet to have a losing year, including this year. I tutor people on technical anaylsis, record and produce videos teaching people how to read stock charts and giving a day to day update of market activity and stocks to watch, and am the host and moderator of a stock market chat room with 424 members to date. I have surrounded myself with very smart, very seasoned stock traders, between us we probably have about 150 years of real stock trading experience in the trenches, and not a single one of us has ever seen a market the likes of what we have on our hands right now.
We have been calling for the Dow Jones to hit 10,000 since January, and it looks like we're gonna be there sooner than later. The exposure of the major financial institutions to the sub-prime mortgage has huge implications that are still unwinding as we speak. Actually, I did a very funny cartoon on the sub-prime mess if anyone is interested in checking it out
http://www.youtube.com/watch?v=sNupvlgAqas.
That said, I take exactly the opposite stance to you guys in terms of the media - while yes they do fear monger to a certain extent, more often than that they get on and hype a stock, or a sector because they, in essence, are employed by the companies that they are hyping. (CNBC is owned by GE, for example). When people buy stock, that stock price goes up, and they understand that when they get on and hype a stock, many members of the retail investing community will buy that stock blind, driving the price up, which hmakes their bosses happy because they have hundreds of millions of dollars in stock options written into their contracts. As such, I am livid at the irresponsibility of cnbc for telling everyone to "take a long term perspective" and to "buy & hold" while their money goes slowly down the tubes at times like this. Actually, I went on a rant in my market outlook on my website on Monday, after hearing CNBC say that "The bottom was in in the market" about 200 times last week, when anyone with any experience and common sense knew that wasn't the case. Here's an excerpt from my rant, you may get a laugh:
"I have touched on this in the chat room a number of times recently, but it makes me utterly sick to listen to these “experts” and commentators on cnbc that go on TV and pimp whatever stock, commodity or sector that suits their interest at that moment in time, with blatant disregard for the fact that people actually do trust what they say and put their retirement money, or their children’s college money, or whatever, on what they say. Now I am without a doubt an advocate for doing your own research and taking responsibility for your own action, but being in the line of work that I am in, it really upsets me when I make a bad call and members get hurt on it. It does happen, it’s a part of the game, and while we always do our best to put ourselves in the least risky situations possible, in essence every stock trade has an element of chance to it, and everyone has a trade go against them from time to time. However we try our damndest to own up to a mistake, keep on the course, and move on to find the next winning trade. Watching this “oh the bottom is in” (which I must have heard a few dozen times last week), followed by the fear mongering, chicken little “the sky is falling” bs that they throw out there to try and get ratings, without even the slightest acknowledgement of a bad call that might have caused some poor retired couple to have to apply for jobs at the local Wal Mart instead of relaxing on a beach sipping a frozen drink makes me absolutely sick. Shame on you CNBC. That’s all for my rant, thanks for listening. "
So I'll get to the point, because as you can probably gather this is a subject that I'm pretty passionate about and could go on forever. I hate the media and their ulterior motives more than everyone you know, but as a friend and fellow foodie I beg of you to excersize extreme caution in this market, because while yes, this too shall pass, it will get worse before it gets better. If this mess has taught us anything, it should be unequivocally that people need to be more pro-active about their investments, and that "buy & hold", or more accurately "buy & hope", is NOT an investment strategy. Trust me, my business grew about 15 times faster during the bull market than it has in the last year and change, but I do feel a responsibility to call it like I see it, unlike the mainstream media.
I'm not going to go into investment strategies here, but I will say that there are recently added equities called short and ultrashort ETFs (Exchange Traded Funds), that are a great way of playing the market to the downside in an IRA or if you don't have margin to short stocks themselves. I've also mentioned that if anyone here is interested in forming some sort of foodie/investor club here on Fohboh I would be happy to do something like that. That said, be careful, be proactive, and as the old saying goes, prepare for the worst and hope for the best. Have a great night.
Jay
First, let me qualify myself as someone who you might want to listen to - My grandfather was a stock broker and an options trader. My dad was a market maker turned private investor who has co-authored two books on swing trading equities. I have been studying the market since I was about 16, and actively trading since I was 18. I am 27 and have yet to have a losing year, including this year. I tutor people on technical anaylsis, record and produce videos teaching people how to read stock charts and giving a day to day update of market activity and stocks to watch, and am the host and moderator of a stock market chat room with 424 members to date. I have surrounded myself with very smart, very seasoned stock traders, between us we probably have about 150 years of real stock trading experience in the trenches, and not a single one of us has ever seen a market the likes of what we have on our hands right now.
We have been calling for the Dow Jones to hit 10,000 since January, and it looks like we're gonna be there sooner than later. The exposure of the major financial institutions to the sub-prime mortgage has huge implications that are still unwinding as we speak. Actually, I did a very funny cartoon on the sub-prime mess if anyone is interested in checking it out
http://www.youtube.com/watch?v=sNupvlgAqas.
That said, I take exactly the opposite stance to you guys in terms of the media - while yes they do fear monger to a certain extent, more often than that they get on and hype a stock, or a sector because they, in essence, are employed by the companies that they are hyping. (CNBC is owned by GE, for example). When people buy stock, that stock price goes up, and they understand that when they get on and hype a stock, many members of the retail investing community will buy that stock blind, driving the price up, which hmakes their bosses happy because they have hundreds of millions of dollars in stock options written into their contracts. As such, I am livid at the irresponsibility of cnbc for telling everyone to "take a long term perspective" and to "buy & hold" while their money goes slowly down the tubes at times like this. Actually, I went on a rant in my market outlook on my website on Monday, after hearing CNBC say that "The bottom was in in the market" about 200 times last week, when anyone with any experience and common sense knew that wasn't the case. Here's an excerpt from my rant, you may get a laugh:
"I have touched on this in the chat room a number of times recently, but it makes me utterly sick to listen to these “experts” and commentators on cnbc that go on TV and pimp whatever stock, commodity or sector that suits their interest at that moment in time, with blatant disregard for the fact that people actually do trust what they say and put their retirement money, or their children’s college money, or whatever, on what they say. Now I am without a doubt an advocate for doing your own research and taking responsibility for your own action, but being in the line of work that I am in, it really upsets me when I make a bad call and members get hurt on it. It does happen, it’s a part of the game, and while we always do our best to put ourselves in the least risky situations possible, in essence every stock trade has an element of chance to it, and everyone has a trade go against them from time to time. However we try our damndest to own up to a mistake, keep on the course, and move on to find the next winning trade. Watching this “oh the bottom is in” (which I must have heard a few dozen times last week), followed by the fear mongering, chicken little “the sky is falling” bs that they throw out there to try and get ratings, without even the slightest acknowledgement of a bad call that might have caused some poor retired couple to have to apply for jobs at the local Wal Mart instead of relaxing on a beach sipping a frozen drink makes me absolutely sick. Shame on you CNBC. That’s all for my rant, thanks for listening. "
So I'll get to the point, because as you can probably gather this is a subject that I'm pretty passionate about and could go on forever. I hate the media and their ulterior motives more than everyone you know, but as a friend and fellow foodie I beg of you to excersize extreme caution in this market, because while yes, this too shall pass, it will get worse before it gets better. If this mess has taught us anything, it should be unequivocally that people need to be more pro-active about their investments, and that "buy & hold", or more accurately "buy & hope", is NOT an investment strategy. Trust me, my business grew about 15 times faster during the bull market than it has in the last year and change, but I do feel a responsibility to call it like I see it, unlike the mainstream media.
I'm not going to go into investment strategies here, but I will say that there are recently added equities called short and ultrashort ETFs (Exchange Traded Funds), that are a great way of playing the market to the downside in an IRA or if you don't have margin to short stocks themselves. I've also mentioned that if anyone here is interested in forming some sort of foodie/investor club here on Fohboh I would be happy to do something like that. That said, be careful, be proactive, and as the old saying goes, prepare for the worst and hope for the best. Have a great night.
Jay
Saturday, August 23, 2008
Wednesday, August 20, 2008
9 stock picks to retire early on!
Well maybe not, but if you keep watching our technical analysis videos and employ proper swing trading techniques, you will be well on your way to financial success! For more please see my site, greenroomstocks.com.. happy trading!
Monday, July 28, 2008
Stock market predictions and technical analysis 7/28/08
commodity stocks appear to have bottomed while financial stocks continue to suffer. See our site to sign up for our free market commentary newsletter!
Sunday, July 27, 2008
Free Stock Market Commentary Video... How To Retire Early Courtesy of the Stock Market!
Keep an eye on our stock market commentary videos to stay informed and on the right side of every stock investment that you make!
Monday, July 7, 2008
7 Ways To Improve Your Stock Trading Results By Using Stop Loss Orders Wisely
There are a number of ways to use stop losses to better stock trading results. Some are very simple, while others are a bit more complex. I will try and keep it to the “simple” side of things here. Like most issues in stock trading, the method and details that you employ must be chosen to fit your individual trading style, as comfort and confidence are musts when it comes to being a successful trader.
I have helped hundreds of traders over the years in my chat room and in individual investment tutoring sessions, and better than 9 out of 10 of them have said that they have much more trouble with exits than with entries. In my opinion, exits are much more important than entries for consistent trading success.
Locating and getting into a trade is relatively easy, however getting out can be very tricky. To the downside, you have to admit that you were wrong, and take your lumps before they become bigger. To the upside, you have to risk leaving potential big profits on the table and get out without pushing your luck too far. By setting your loss parameters prior to entering the trade you can eliminate some of the tough decisions that are certain to present themselves once in the trade.
Below I am going to detail a few suggestions for setting – and maintaining various stop losses to help with exiting a trade for maximum profits while minimizing risk. Some of these are fairly simple and commonplace, others are a bit more complicated. The suggestions below are referring to a long position traded on daily bars ... consider the logic reversed (and sometimes speeded up a bit) for shorts:
1) Never lower the stop, once set.
2) Re-evaluate your stop loss daily, raising it to lock in profits whenever there is a valid point of support (Moving average, trendline, price support, etc) that it can be placed under.
3) Calculate the stop-loss percentage based on average volatility (daily trading range) and company fundamentals)
4) Check your stocks every morning at the open just in case something gaps below your stop.
5) Tighten the stop loss for the volatility as trade progresses, using the previous days trading range as a parameter.
6) Depending on position size, it can be a good idea to set a few different stops with a few different prices, so you can scale out of the trade.
7) In general, it is better to set alerts rather than hard orders (if you are available, and have the conviction to hit the “sell” button when the alert hits - I do know people who won’t).
Here's an example, using CELG. Lets say that we bought on a break of the 50 day simple moving average (orange line) on 6/25, with an initial stop below price support at $58.85 or so, where we saw it bounce a few times in May & June. This gives it a few areas of support to bounce if it does pull back, and leaves us with a relatively small, roughly 5% loss to the downside if we are wrong.
We can see the stock rose nicely in the three days following our buy point. Once a cushion on the trade has been established, we can raise our stop to just below the 50 day moving average, which gives up a few moving averages as support, and now our downside risk is next to nothing. On 7/1, we saw a big gap up and an 8.44% gain on the day. At that point, one could raise the stop, either to under the 7/1 intraday low, or below the 10 day moving average (white line), or both. This is an example of how raising the stop as you go can lock in profits while reducing downside risk.
Much can be, and has been said about all of these concepts elsewhere, along with extensive discussions on choosing an appropriate position size, which is in essence a close cousin to the concepts above.
This is just an overview, suggestions and observations, but that's part of the point. Everything is subjective, and everything can and should be modified to fit with what is comfprtable for YOU! These are simply things I have noticed over the years in my own trading and in talking to a whole lot of individual traders and investors… hopefully you will use some of these suggestions as a starting point and create something that fits in with your own trading style, and make you a better trader as a result. There are various ways to win in this game.
For more discussions, to join our live chat, watch our nightly video reviews and access our nightly stock picks and market commentary, please sign up for a free monthly membership on our website by clicking here
Until next time, happy trading
I have helped hundreds of traders over the years in my chat room and in individual investment tutoring sessions, and better than 9 out of 10 of them have said that they have much more trouble with exits than with entries. In my opinion, exits are much more important than entries for consistent trading success.
Locating and getting into a trade is relatively easy, however getting out can be very tricky. To the downside, you have to admit that you were wrong, and take your lumps before they become bigger. To the upside, you have to risk leaving potential big profits on the table and get out without pushing your luck too far. By setting your loss parameters prior to entering the trade you can eliminate some of the tough decisions that are certain to present themselves once in the trade.
Below I am going to detail a few suggestions for setting – and maintaining various stop losses to help with exiting a trade for maximum profits while minimizing risk. Some of these are fairly simple and commonplace, others are a bit more complicated. The suggestions below are referring to a long position traded on daily bars ... consider the logic reversed (and sometimes speeded up a bit) for shorts:
1) Never lower the stop, once set.
2) Re-evaluate your stop loss daily, raising it to lock in profits whenever there is a valid point of support (Moving average, trendline, price support, etc) that it can be placed under.
3) Calculate the stop-loss percentage based on average volatility (daily trading range) and company fundamentals)
4) Check your stocks every morning at the open just in case something gaps below your stop.
5) Tighten the stop loss for the volatility as trade progresses, using the previous days trading range as a parameter.
6) Depending on position size, it can be a good idea to set a few different stops with a few different prices, so you can scale out of the trade.
7) In general, it is better to set alerts rather than hard orders (if you are available, and have the conviction to hit the “sell” button when the alert hits - I do know people who won’t).
Here's an example, using CELG. Lets say that we bought on a break of the 50 day simple moving average (orange line) on 6/25, with an initial stop below price support at $58.85 or so, where we saw it bounce a few times in May & June. This gives it a few areas of support to bounce if it does pull back, and leaves us with a relatively small, roughly 5% loss to the downside if we are wrong.
We can see the stock rose nicely in the three days following our buy point. Once a cushion on the trade has been established, we can raise our stop to just below the 50 day moving average, which gives up a few moving averages as support, and now our downside risk is next to nothing. On 7/1, we saw a big gap up and an 8.44% gain on the day. At that point, one could raise the stop, either to under the 7/1 intraday low, or below the 10 day moving average (white line), or both. This is an example of how raising the stop as you go can lock in profits while reducing downside risk.
Charts Courtesy of Worden Bros Inc.
Much can be, and has been said about all of these concepts elsewhere, along with extensive discussions on choosing an appropriate position size, which is in essence a close cousin to the concepts above.
This is just an overview, suggestions and observations, but that's part of the point. Everything is subjective, and everything can and should be modified to fit with what is comfprtable for YOU! These are simply things I have noticed over the years in my own trading and in talking to a whole lot of individual traders and investors… hopefully you will use some of these suggestions as a starting point and create something that fits in with your own trading style, and make you a better trader as a result. There are various ways to win in this game.
For more discussions, to join our live chat, watch our nightly video reviews and access our nightly stock picks and market commentary, please sign up for a free monthly membership on our website by clicking here
Until next time, happy trading
Sunday, May 18, 2008
10 Simple Rules For Stock Trading Success
Rule 1. To trade successfully you must develop a system and approach that you feel comfortable with. Without comfort and confidence, you are dead before you start. The best way to start this process is to first learn how others before you thought for themselves successfully. Strive to become educated, informed and aware, and do your best to stay that way.
Rule 2. Always have an exit strategy in mind when you enter the trade. Always have a plan, and always have a maximum dollar amount that you are willing to lose. For example if you are playing a $5,000 position, and are willing to lose no more than $250 on the trade if it goes against you, select a stock that has seen recent buying action (price support) within 5% of your purchase price.
Rule 3. As the price of the stock rises (or falls if you are short) adjust your stops and targets accordingly. This will serve to not only limit your downside risk, but also to allow your winners to run.
Rule 4. Prior to investing in any equity pay particular attention to the risk/reward ratio. The essence of the market is risk, and to be profitable in the long run the risk must make sense in terms of probable and potential return.
Rule 5. Initially your portfolio of potential stocks whether chosen by technical analysis, fundamental analysis, or both, should be comprised of no more than 15-20 equities. Know everything there is to know about your listing, including price history, financials, business strengths, management and earnings dates. When you become experienced at using technical analysis to judge entry and exit points you can modify this focus.
Rule 6. When starting to apply a new trading strategy, paper-trade first as an initial test, but then play for small (relatively speaking, of course) positions for awhile. Paper trading is a great way to theorize, but cannot replicate the emotion and tough decisions that arise when you have your hard earned money on the line. Only when you have proven that your strategy is working in your favor in real life trading situations should you risk more of your capital.
Rule 7. Keep a trading diary or record for analysis and review. You have to know what is working and what isn’t. Have the humility to recognize what you are doing wrong and be willing to take all the necessary steps to changing it.
Rule 8. Be consistent in your approach. Discipline will help you eliminate emotion from the process and allow experience, rationality and technique to prevail over fear, panic and euphoria.
Rule 9. Always know the trend of the market and of the stocks in your portfolio. The trend is your friend. Be aware that in a bull market, price points such as trendlines, envelope channels, and significant moving averages often act as price support, and in a bear market they offer points of resistance.
Rule 10. Be patient and learn to realize that, if no investment prospect presents itself, the best place to be is in cash, since the most important rule of all is: CAPITAL PRESERVATION IS KEY!!!
These are 10 rules that can put you on the fast track to stock trading and investment success. Stay diligent, stay disciplined, and most of all – stay patient… to your trading success!
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