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over the last month and a half ive been working on devising a new trading style for myself since the nasdaq stocks started to act not so great although some are looking better now. Im glad I switched though because im finding better success with my new trading style. I typed this up and put it on my wall by my computer as a reminder of my trading rules but thought id post it here. Ill post it underneath this post. Ive never read any penny stock books or anything so if anything I write seems wrong or unorthodox its just because I came up with some of my rules by my own observation of what I felt to be patterns. I got some ideas from people here, rickpicks post in paticular was very helpful. If anyone has any questions, comments or critisisms feel free to post. Or if you have a set of trading rules that youve come up with feel free to post. It would be interesting to see what other traders consider before buying a stock. All the rules that I wrote are predicated on buying on news and at the markets open or within a few minutes of the markets open.
Posts: 205 | From: ca | Registered: Aug 2005
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RULES FOR TRADING STOCKS BASED OFF NEWS November 9, 2005
1. THE HIGHER THE PRICE THE STOCK IS, THE GREATER THE NEWS MUST BE TO MOVE IT. 2. LOWER PRICED STOCKS TEND TO GIVE GREATER PERCENTAGE GAINS THAN HIGHER 3. THE ELEMENT OF SURPRISE IS IMPORTANT. DON’T TRADE BASED OFF NEWS THAT IS ALREADY LIKELY KNOWN. 4. CHECK CHART TO SEE IF THE STOCK HAS ALREADY RAN UP. THIS COULD BE AN INDICATION THAT WORD HAS ALREADY GONE OUT THAT THE NEWS WAS FORTHCOMING. 5. CHECK THE SPREAD. 5 PERCENT OR LOWER IS BEST. 6. IF THE OPENING SPREAD IS TO WIDE, WAIT AND SEE IF IT NARROWS. AS LONG AS THE STOCK DOESN’T GO BELOW ITS OPENING PRICE THE STOCK IS STILL A POTENTIAL PLAY. THE FLUCTUATIONS IN THE SPREAD ARE NOT THAT IMPORTANT FOR DETERMINING THE DAYS POTENTIAL OUTCOME AT THE MARKETS OPEN. 7. CHECK VOLUME. ACCEPTABLE VOLUME CAN DIFFER GREATLY FROM ONE STOCK TO ANOTHER DEPENDING ON THE STOCKS PRICE. THE HIGHER THE PRICE OF A STOCK, THE LOWER THE VOLUME NECESSARY AND VICE VERSA. ONLY CHECK TO MAKE SURE STOCK IS SAFE TO ENTER AND EXIT. 8. CHECK OUTSTANDING SHARES. MAKE SURE THERE ARE ENOUGH SHARES BEING TRADED TO ENSURE A SAFE ENTRY AND EXIT POINT. DON’T USE OUTSTANDING SHARES TO DETERMINE A STOCKS VOLATILITY. USE THE STOCKS HISTORICAL CHART TO DETERMINE VOLATILITY. 9. CHECK MARKET CAP TO SEE HOW MUCH MONEY IS INVESTED IN THE COMPANY TO DETERMINE WHETHER A STOCK IS SAFE TO ENTER AND EXIT. 10. CHECK PAST NEWS AND SEE WHAT KIND OF NEWS MOVED THE STOCK AND HOW MUCH IT MOVED IT. 11. CHECK CHART HISTORY TO SEE IF STOCK MOVED IN THE PAST. 12. BUY STOCK AT MARKET OPEN AND USE THE STOCKS OPENING PRICE AS A STOP LOSS POINT. IF THE STOCK DIPS BELOW ITS OPEN IT WILL LIKELY NOT RUN MORE THAN 5 PERCENT AND THEREFOR NOT CLEAR THE SPREAD. IT WILL LIKELY SELL OFF AND NOT RUN. 13. TAKE INTO ACCOUNT GAP UPS. 14. SAVE EVERY PR THAT CAUSED A STOCK TO PERFORM WELL. SEE WHY IT MOVED SO WELL AND THE PRICE THAT IT OPENED AT. LEARN HOW TO PUT EVERYTHING TOGETHER. THE WEIGHT OF THE NEWS, THE PRICE OF THE STOCK, HOW FAR THE CHART IS DOWN OR UP, GAP UPS ETC... DETERMINE WHETHER IT IS GREATER TO BUY FOR EXAMPLE, A STOCK THAT IS DOWN WITH GREAT NEWS THAT TRADES AT .70 OR A STOCK THAT IS DOWN WITH OK NEWS THAT TRADES AT .006.
Posts: 205 | From: ca | Registered: Aug 2005
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