posted
So as said in the subject, i am beginning. I don't know a whole lot of the lingo or how a lot of this stuff works. I only have a $1000 starting out so i will mainly be doing 3 or less day trades a week (obviously 3 or less b/c you have to have the $25k min. to do more) or a couple swing trades. Anyways, i need a good source of information in getting started. What rules there are, what everything means, etc. PLEASE HELP.
There is a lot of great info contained within this topics list that ought to help you with some of your questions. I'd suggest read through them and then post specific questions asking for clarification of any points you don't understand as otherwise you are going to get a glut of info on all sorts of things that may or may not be helpful to you.
You asked about rules and here are the two biggies.
One you know, in a cash account you can only do three roundtrips per week. We had another newbie who didn't clearly undstand this recently on Allstocks who ended up getting his account suspended and fined for not following this rule.
The second regards settled funds.
It is a little complicated but it goes like this.
Account has 1000k settled funds Buys 1000k worth of stock A on Monday Sells stock A later that day. That 1000k plus any profit will be "unsettled" for the next three days.
You MAY purchase stock B at anytime with "unsettled" funds However you MAY NOT sell stock B until the funds settle three days after stock A's sale.
Some folks wait to make another purchase until they know their funds are settled. Some folks split their money so they always have some settled funds in their account. Whatever way works for you.
I'd suggest you read up in your brokers helpsite on unsettled funds until you undertand what this means as it can get you in trouble if you violate and take a "free ride."
TEX,
would one of you go through and find a good newbie thread to sticky to the top of the board? That way the newb's can easily find reseach material and then post specific and informed questions rather than general pleas for help?
No offense to you meant P-Diddy,
We have one or two of these types of posts every week and it gets hard to remember who has said what to who or if you are just repeating yourself.
Good Luck to you P and feel free to PM if you are having problems.
Oh, and come into this with the understanding that everybody has something to sell. Myself included. Learn to differentiate helpful information from stock pick solicitation. You will do a lot better to keep your head up and reason things out for yourself than to follow the herd.
The Bigfoot
-------------------- No longer eligible for government service due to lack of tax issues.
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Before you buy a stock, you shoud observe at least 3 runs from when they start, to when the fall back down again to where they started. During the runs, look at the threads for that stock, and read what everyone says at each stage of the stocks run. You'll notice that most of what people say, never comes to pass. As far as how high the stock will go.
To observe these runs, and how stocks react as soon as news comes out, I suggest you get the free-trial for Microcaptrade. Almost all penny traders have it. I couldn't trade with out it. You get a discout at allstocks because it is so poupular with penny traders. Here is the link....
At 8:30 I start reading J_U_ICE 's PR thread in the .10 and under board. Or you could just read the news in Microcaptrade. But J_U_ICE usualy posts the important PR's any way. I also skim all of the hot threads, and the "BB Penny's Haven" board at IHUB. At 9:00 I start looking at the top 400 in Microcaptrade, and sort them by the # of trades, to see which stocks are getting the most Pre-Market trades and interest, weather it's buying or selling. You can see if stocks with the most pre market trades had a PR or not, by the mark in the left column. That is very usefull.
At Opening Bell (9:30), I bring up Microcaptrade's News, top 400, and the streamer, to see which stocks are the most active for buying or selling. I also have the trading alerts up to see if block buys or sales are comming in for any stocks. And the most important thing is to have the news in Microcaptrade up at all times, to catch a hot PR when it comes out and get in early. If you get in early, and it doesn't run like you thought it would, you can usually sell and at least break even, if you got in early.
Here's the link for J_U_ICE's PR thread. It's always the thread at the top.......
And remember, there's alot of pumping at BB's Penny Haven and all these boards, so just use them to see what stocks have the most hype. Take everything you read with a grain of salt. Try to get in stocks early and get out early, even if it is a small profit.
Also not all pumpers say "To da Moon" or "This is gonna be a 10 Bagger." There are intelligent and sophisticated Pumpers, Too. They will post a well thought out post...with numbers, figures, PE ratio's, and what they claim to be the fair value of the stock. It's still a pump and the stock will never go that high. And if it does, it's Okay, Because you will already be in the next hot stock.....Right?
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posted
wow...you guys are awesome, thank you so much for the information. the willingness to take your time to teach me a bit is amazing and i thank you....i am going to be researching a lot and im sure we will speak again
posted
I didn't want to retype what I have said to newbies because it gets tiring lol So I copy/paste one of my posts to another newbie in a different thread:
We really need a sticky thread for newbies so we don't have to keep typing certain things out again and again lol some tips below:
1. Read books before you trade. Do a keyword search of my name and "books" for suggestions
2. The bad thing about papertrading is you won't be tied to your money which is a good thing but you need to do the same thing when trading with "real" money. Be emotionally distached to your money. Also perhaps you should get a software program so you can "paper trade" so to speak in real time with "play" money. Much like if you try a online poker site and you can try the games with "play" money first before plunging into the real money games.. I do not know of any software or sites for trading like this so perhaps others can suggest some. I do know that FOREX (currency trading) brokers do offer "Demo" accounts which is what i described. "Play" money accounts in real time.
3. Consider FOREX over stock trading. Many more advantages such as only 7 major currencies to keep a track of compared to about 9,000 stocks in the stock exchanges, short selling without a margin account or uptick rule, getting leverage of between 200:1 to 400:1 and being able to open a mini account for as small as $100 to $300, can put a limit order;stop/loss order; limit profit order all at the same time , profits are bigger in shorter moves with less money to put out, etc. etc. If interested in reading about FOREX try this site's quickstart guide: www.babypips.com
4. Put stop/loss orders on all your trades if not a actual one then a mental one. Limit your losses, protect your profits.
5. Plan your trade, trade your plan.
6. The Trend is your friend don't go against it.
7. Do not buy stocks based on tips, rumors, online stock picking services etc. Do your own DD because after all your the best manager of your money because you care more about your money then anyone else. Don't listen to your stock broker because they are glorified bookies. They place your bet whether you win or lose and collect their commission.They don't care if you make $$ or not. Clients are dime a dozen to them.
8. Don't trade pennystocks if you plan to get rich quick. Pennystocks really aren't for beginner's because of the scams, volatility, etc. Instead trade stocks in Big Boards even penny stocks that are traded on the Big Boards. But I would suggest you trade stocks between $20 to $60 price ranges. There are 9,000 stocks at any one given time and the ones in 20 to 60 price range will reduce that number signficantly for you to find a winner.
9. Don't use so many indicators. They will give too many different signals. Choose two or three indicators that are easy to understand. Don't use some complicated Indicator just because it is mentioned on the board and everyone wants to sound like a rocket scientist mentioning and using them. Most of those people do not know how to use it and are just babbling. The one's i use are RSI & MACD along with Moving averages, volume and candlesticks. All easy to use and understand and do the same job as the complicated ones without giving you a headache.Practice KISS (Keep it Simple Silly).
10. Remember Cash is a position too. If you do not see a stock that meets your criteria do not trade just for the sake of trading. You will see alot of people on this board trading everyday with no break in between because they always need to be in "action" much like a sports bettor or other gamblers. We are trying to take the gamble out of this game and put the odds in our favor and being in cash is sometimes necessary till we see a stock that meets our criteria.
We'll this is just 10 tips or rules from me.. hope i didn't make it too long lol I could add more to it but im tired right now so I'll let others add more. I'll get you started by giving you 3 book suggestions and one broker suggestion. For other books do the search on my name and keyword : books.
Books:
1. A Beginner's Guide to Short Term Trading by Toni Turner www.toniturner.com
2. The Candlestick Course by Steve Nison www.candlecharts.com (his other books are also suggested but this one is a easy read)
3. How I Made $2,000,000 In The Stock Market by Nicolas Darvas
posted
Great posts here. i've been interested in stock sfor some time and have just openeda $2K accoun on wensday nad now am down $300, one pick from here and one OB on my own. I have a question. I bought a OB energy stock at .63 it has gone down to 56 and I fear (I know) it will fall further. If i sell it on monday for a loss, how long do I have to wait before i can buy it back? I think it will go down the next 2 weeks and then up in nov. Thanks.
-------------------- Do not invest on any of my suggestions
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posted
Yep this article is very true. thanks for yet another piece to the puzzle on winning in stocks. Now if i sell at a loss, can I buy in 2 weeks if the stock falls to a new low? I know it will rise in Nov/Q report and rise in NG price. Or wait 30 days? IOW am I legally bound not to buy the stock back within 30 days? Or only because I will lose that loss for yr end tax purposes?
-------------------- Do not invest on any of my suggestions
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posted
isnt that only at the end of the year?... if you get out of a stock at a loss at the end of the year, to take a loss on taxes for say '05. cant buy back into it for 30 days.
Correct me if im wrong, not sure myself.
-------------------- "Money, so they say Is the root of all evil today."
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Before you invest in a microcap company, arm yourself with information. This Financial Guide gives you the basics about microcap stocks, discusses how to find information on them, and points out what "red flags" to watch out for.
Information is the investor's best tool when it comes to investing wisely. But accurate information about "microcap stocks" low-priced stocks issued by the smallest of companies, often called "penny stocks" may be difficult to find. Many microcap companies do not file financial reports with the SEC, so it's hard for investors to get the facts about the company's management, products, services, and finances. When reliable information is scarce, wrongdoers can easily spread false information about microcap companies, making profits while creating losses for unsuspecting investors.
Table of Contents What is a Microcap Stock? Where do Microcap Stocks Trade? How Are Microcap Stocks Different From Other Stocks? Which Companies File Reports With the SEC? Which Companies Don't Have to File Reports With the SEC? Offering Requirements and Exemptions Why Public Information Is So Important? Some Common Penny Stock Fraud Schemes How Do I Get Information About Microcap Companies? Steps You Should Take Before Investing
WHAT IS A MICROCAP STOCK? The term "microcap stock" applies to companies with low or "micro" capitalizations, meaning the total value of the company's stock. Microcap companies typically have limited assets. For example, in recent cases where the SEC suspended trading in microcap stocks, the average company had only $6 million in net tangible assets - and nearly half had less than $1.25 million. Microcap stocks tend to be low priced and trade in low volumes.
WHERE DO MICROCAP STOCKS TRADE? Many microcap stocks trade in the "over-the-counter" (OTC) market and are quoted on OTC systems, such as the OTC Bulletin Board (OTCBB) or the "Pink Sheets."
OTC Bulletin Board. The OTCBB is an electronic quotation system that displays real-time quotes, last-sale prices, and volume information for many OTC securities not listed on the NASDAQ or a national securities exchange. Brokers who subscribe to the system can use the OTCBB to look up prices or enter quotes for OTC securities.
CAUTION: Although the NASD oversees the OTCBB, the OTCBB is not part of the NASDAQ. Wrongdoers often claim that an OTCBB company is a NASDAQ company to mislead investors.
The "Pink Sheets." The Pink Sheets named for the color of paper they've historically been printed on are a weekly publication of a company called the National Quotation Bureau. They are updated daily electronically. Brokers who subscribe to the Pink Sheets can find out the names and telephone numbers of the "market makers" in various OTC stocks meaning the brokers who commit to buying and selling those OTC securities. Unless your broker has the Pink Sheets or you contact the market makers directly, you'll have a difficult time finding price information for most stocks quoted in the Pink Sheets. HOW ARE MICROCAP STOCKS DIFFERENT FROM OTHER STOCKS? Microcap stocks differ from other stocks in a number of ways:
Lack of Public Information. The biggest difference between a microcap stock and other stocks is the amount of reliable, publicly available information about the company. Larger public companies file reports with the SEC that any investor can get for free from the SEC's website. Professional stock analysts regularly research and write about larger public companies, and it's easy to find larger companies' stock prices. In contrast, information about microcap companies can be extremely difficult to find, making them more vulnerable to investment fraud schemes.
Note: The SEC has proposed new rules that will increase the amount of information brokers must gather about microcap companies before quoting prices for their stocks in the OTC market.
No Minimum Listing Standards. Companies that trade their stocks on major exchanges and in the NASDAQ must meet minimum listing standards. For example, they must have certain minimums when it comes to net assets, and minimum numbers of shareholders. In contrast, companies on the OTCBB or the Pink Sheets do not have to meet any minimum standards.
Risk. While all investments involve risk, microcap stocks are among the most risky. Many microcap companies are new, with no track record. Some of these companies have no assets or operations. Others have products and services that are still in development or have yet to be tested in the market.
WHICH COMPANIES FILE REPORTS WITH THE SEC? In general, the federal securities laws require all but the smallest of public companies to file reports with the SEC. A company can become "public" in one of two ways by issuing securities in an offering or transaction that's registered with the SEC or by registering the company and its outstanding securities with the SEC. Both types of registration trigger ongoing reporting obligations, meaning the company must file periodic reports that disclose important information to investors about its business, financial condition, and management.
This information is a treasure trove for investors: it tells you whether a company is making money or losing money and why.
TIP: You'll find this information in the company's quarterly reports on Form 10-Q, annual reports (with audited financial statements) on Form 10-K, and periodic reports of significant events on Form 8-K.
A company must file reports with the SEC if:
It has 500 or more investors and $10 million or more in assets; or It lists its securities on the following stock markets: American Stock Exchange Boston Stock Exchange Cincinnati Stock Exchange Chicago Stock Exchange NASDAQ New York Stock Exchange Pacific Exchange Philadelphia Stock Exchange Currently, only about half of the 6,500 companies whose securities are quoted on the OTCBB file reports with the SEC.
Note: In January 1999, the SEC approved a new NASD rule allowing the NASD to require that all OTCBB companies file updated financial reports with the SEC or with their banking or insurance regulators. The new rule now applies to all companies on the OTCBB. Companies refusing to file with the SEC or their banking or insurance regulators cannot remain on the OTCBB.
With few exceptions, companies that file reports with the SEC must do so electronically using the SEC's EDGAR system. EDGAR stands for electronic data gathering and retrieval. The EDGAR database is available on the SEC's Web site at www.sec.gov. You'll find many corporate filings in the EDGAR database, including annual and quarterly reports and registration statements. Any investor can access and download this information for free from the SEC's Web site.
CAUTION: As with any information, SEC filings should be read with a questioning and critical mind.
WHICH COMPANIES DON'T HAVE TO FILE REPORTS WITH THE SEC? Smaller companies those with less than $10 million in assets generally do not have to file reports with the SEC. But some smaller companies, including microcap companies, may choose voluntarily to register their securities with the SEC. As described above, companies that register with the SEC must also file quarterly, annual, and other reports.
OFFERING REQUIREMENTS AND EXEMPTIONS Any company that wants to offer or sell securities to the public must either register with the SEC or meet an exemption. Here are two of the most common exemptions that many microcap companies use:
"Reg. A" Offerings. Companies raising less than $5 million in a 12-month period may be exempt from registering their securities under a rule known as Regulation A. Instead of filing a registration statement through EDGAR, these companies need only file a printed copy of an "offering circular" with the SEC containing financial statements and other information. "Reg. D" Offerings. Some smaller companies offer and sell securities without registering the transaction under an exemption known as Regulation D. Reg D exempts from registration companies that seek to raise less than $1 million dollars in a twelve-month period. It also exempts companies seeking to raise up to $5 million, as long as the companies sell to 35 or fewer individuals or any number of "accredited investors" who must meet high net worth or income standards. In addition, Reg D exempts some larger private offerings of securities. While companies claiming an exemption under Reg. D don't have to register or file reports with the SEC, they must still file what's known as a "Form D" within a few days after they first sell their securities. Form D is a brief notice that includes the names and addresses of owners and stock promoters, but little other information about the company.
TIP: You may be able to find out more about Reg. D companies by contacting your state securities regulator.
Unless they otherwise file reports with the SEC, companies that are exempt from registration under Reg. A, Reg. D, or another offering exemption, do not have to file reports with the SEC.
WHY PUBLIC INFORMATION IS SO IMPORTANT? Many of the microcap companies that don't file reports with the SEC are legitimate businesses with real products or services. But the lack of reliable, readily available information about some microcap companies can open the door to fraud. It's easier to manipulate a stock when there's little or no information available about the company.
Microcap fraud depends on spreading false information. Here's how some perpetrators carry out their scams:
Questionable Press Releases. Con artists often issue press releases that contain exaggerations or lies about the microcap company's sales, acquisitions, revenue projections, or new products or services. Paid Promoters. Some microcap companies pay stock promoters to recommend or "tout" the microcap stock in supposedly independent and unbiased investment newsletters, research reports, or radio and television shows. The federal securities laws require the newsletters to disclose who paid them, the amount, and the type of payment. But many con artists fail to do so and mislead investors into believing they are receiving independent advice. Internet Fraud. Con artists often distribute junk e-mail or "spam" over the Internet to spread false information quickly and cheaply about a microcap company to thousands of potential investors. They also use aliases on Internet bulletin boards and chat rooms to hide their identities and post messages urging investors to buy stock in microcap companies based on supposedly "inside" information about impending developments at the companies. "Boiler Rooms" and Cold Calling. Dishonest brokers set up "boiler rooms" where a small army of high-pressure salespeople use banks of telephones to make cold calls to as many potential investors as possible. These strangers hound investors to buy "house stocks" - stocks that the firm buys or sells as a market maker or has in its inventory.
TIP: Never buy stock in response to a cold call.
SOME COMMON PENNY STOCK FRAUD SCHEMES Microcap fraud schemes can take a variety of forms. Here's a description of the two most common:
The Classic "Pump and Dump" Scheme. It's common to see messages posted on the Internet that urge readers to buy a stock quickly or to sell before the price goes down, or a telemarketer will call using the same sort of pitch. Often the promoters will claim to have "inside" information about an impending development or to use an "infallible" combination of economic and stock market data to pick stocks. In reality, they may be company insiders or paid promoters who stand to gain by selling their shares after the stock price is pumped up by the buying frenzy they create. Once these con artists sell their shares and stop hyping the stock, the price typically falls, and investors lose their money.
The Off-Shore Scam. Under a rule known as "Regulation S," companies do not have to register stock they sell outside the United States to foreign or "off-shore" investors. In the typical off-shore scam, an unscrupulous microcap company sells unregistered Reg. S stock at a deep discount to con artists posing as foreign investors. These con artists then sell the stock to U.S. investors at inflated prices, pocketing huge profits, which they share with the microcap company insiders. The flood of unregistered stock into the U.S. eventually causes the price to plummet, leaving unsuspecting U.S. investors with enormous losses.
Note: The SEC recently strengthened Reg. S to make this type of fraud harder to conduct.
HOW DO I GET INFORMATION ABOUT MICROCAP COMPANIES? If you're working with a broker or an investment adviser, you can ask your investment professional if the company files reports with the SEC and to get you written information about the company and its business, finances, and management. Be sure to carefully read the prospectus and the company's latest financial reports.
You can also get information on your own from these sources:
From the company. Ask the company if it is registered with the SEC and files reports with us. If the company is small and unknown to most people, you should also call your state securities regulator to get information about the company, its management, and the brokers or promoters who've encouraged you to invest in the company. From the SEC. A great many companies must file their reports with the SEC. Using the EDGAR database, you can find out whether a company files with the SEC, and get any reports you're interested in. For companies that do not file on EDGAR, check with the SEC's Public Reference Room to see whether the company has filed an offering circular under Reg. A. From your state securities regulator. We strongly urge you to contact your state securities regulator to find out whether they have information about a company and the people behind it. Look in the government section of your phone book or visit the website of the North American Securities Administrators Association to get the relevant name and phone number. Even though the company does not have to register its securities with the SEC, it may have to register them with your state. Your regulator will tell you whether the company has been legally cleared to sell securities in your state. From other government regulators. Many companies, such as banks, do not have to file reports with the SEC. But banks must file updated financial information with their banking regulators. MORE: Visit the Federal Reserve System's National Information Center of Banking Information site at www.ffiec.gov/NIC, the Office of the Comptroller of the Currency at www.occ.treas.gov, or the Federal Deposit Insurance Corporation at www.fdic.gov.
From reference books and commercial databases. Visit your local public library or the nearest law or business school library. You'll find many reference materials containing information about companies. You can also access commercial databases for more information about the company's history, management, products or services, revenues, and credit ratings. But there are a number of commercial resources you may consult, including: Bloomberg, Dun & Bradstreet, Hoover's Profiles, Lexis-Nexis, and Standard & Poor's Corporate Profiles. The Secretary of State Where the Company Is Incorporated. Contact the secretary of state where the company is incorporated to find out whether the company is a corporation in good standing. You may also be able to obtain copies of the company's incorporation papers and any annual reports it files with the state.
CAUTION: If you've been asked to invest in a company but you can't find any record that the company has registered its securities with the SEC or your state, or that it's exempt from registration, call or write your state's securities regulator or the SEC immediately with all the details. You may have come face to face with a scam.
STEPS YOU SHOULD TAKE BEFORE INVESTING To invest wisely and avoid investment scams, research each investment opportunity thoroughly and ask questions. These simple steps can make the difference between profits and losses:
1. Find out whether the company has registered its securities with the SEC or your state's securities regulators.
2. Make sure you understand the company's business and its products or services.
3. Read the most recent reports the company has filed with its regulators and pay attention to the company's financial statements, particularly if they are not audited or not certified by an accountant. If the company does not file reports with the SEC, be sure to ask your broker for what's called the "Rule 15c2-11 file" on the company. That file will contain important information about the company.
4. Check out the people running the company with your state securities regulator, and find out if they've ever made money for investors before. Also ask whether the people running the company have had run-ins with the regulators or other investors.
5. Make sure the broker and his or her firm are registered with the SEC and licensed to do business in your state. And ask your state securities regulator whether the broker and the firm have ever been disciplined or have complaints against them.
Also, watch out for these "red flags":
SEC Trading Suspensions. The SEC has the power to suspend trading in any stock for up to 10 days when it believes that information about the company is inaccurate or unreliable. Think twice before investing in a company that's been the subject of an SEC trading suspension. MORE: You'll find information about trading suspensions on the SEC's Website.
High Pressure Sales Tactics. Beware of brokers who pressure you to buy before you have a chance to think about and investigate the "opportunity." Dishonest brokers may try to tell you about a "once-in-a-lifetime" opportunity or one that's based on "inside" or "confidential" information. Don't fall for brokers who promise spectacular profits or "guaranteed" returns. These are the hallmarks of fraud. If the deal sounds too good to be true, then it probably is. Assets Are Large But Revenues Are Small. Microcap companies sometimes assign high values on their financial statements to assets that have nothing to do with their business. Find out whether there's a valid explanation for low revenues, especially when the company claims to have large assets. Odd Items in the Footnotes to the Financial Statements. Many microcap fraud schemes involve unusual transactions among individuals connected to the company. These can be unusual loans or the exchange of questionable assets for company stock, which may be discussed in the footnotes. Unusual Auditing Issues. Be wary when a company's auditors have refused to certify the company's financial statements or if they've stated that the company may not have enough money to continue operating. Also question any change of accountants. Insiders Own Large Amounts of the Stock. In many microcap fraud cases especially "pump and dump" schemes the company's officers and promoters own significant amounts of the stock. When one person or group controls most of the stock, they can more easily manipulate the stock's price at your expense. You can ask your broker or the company whether one person or group controls most of the company's stock, but if the company is the subject of a scam, you may not get an honest answer.
CAUTION: Don't deal with brokers who refuse to provide you with written information about the investments they're promoting.
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