After reading a book about how to handle money so that you can later become free in life I came out with a new outlook on stocks.
One of the points the author wrote was that, "When it comes to making money it is common sense. Unfortunately, common sense is uncommon."
Meaning, people sometimes over analyze or lose sight of the basics that are guaranteed to make money. Assets vs liabilities.
So I would like to perhaps mold a form of stock trading system around this. I ask from all of you, basic rules or ideas that tend to be true for playing stocks. For example, "volume precedes price." Will and JimSC have made some excellent picks simply based on the concept of finding stocks with unusually high volume aka UHV.
Are there other basic rules we can follow that are similar to that? TIA. Matt
Posted by plni on :
Great post I believe the most important rule pertains to takeing profits,and knowing where to sell is no easy thing,I use the 100% rule. that is to say sell half anytime you double.then you are holding free shares and your decision to hold or sell the remaining shares will effect profit only because to have already eliminated any chance of loss.yogi bera said it best,
("when you come to a fork in the road take it")
Posted by permanentjaun on :
Very good idea. That should be more common sense. Can't lose what isn't yours i.e. "free shares"
Good post, although I'm looking more for rules about how to find those gainers so your rule can come into effect. I seem to be having difficult finding those 100% gainers. Matt
Posted by will on :
Matt, I think the rules for any given trader would be dictated by their style or stradegy. Some folks use microcap filters to catch volume and price alerts, and buy into runs, probably works best for day traders and short term players. Some people use fundementals, and go for the long haul, investors. Some people play bottoms, can be dangerous if you misguess bottom. So, first I think you have to decide on a style/stradegy, and develop a system/discipline/rules from there.
Posted by Doniboy on :
Here is one of the basic maxims of Peter Lynch's trading strategy as reported by fool. com. Although I know that he does not like penny stocks this rule may still hold merit for those of us here:
Among Lynch's favorites are companies whose sales and earnings are expanding 20% to 30% a year. The classic Lynch play during the past decade might be Starbucks, which has consistently grown sales and earnings at superior rates. The company has a sterling balance sheet and generates substantial earnings by selling an addictive product, which is purchased every day at a premium by its loyal customers.
The real trick is to find fast growers, such as Starbucks, in their early stages. Some candidates that I recently added to my watch list include Lifetime Brands (Nasdaq: LCUT), Rimage (Nasdaq: RIMG), and Tower Group (Nasdaq: TWGP), all of which sport three-year sales and earnings growth rates north of 20%. At the same time, don't shy away from a slower-growth business selling at a truly great price. Hidden Gems can take either form.
Good post Will...just wished I had the time to be a daytrader.
Got the money...just not the time. Posted by buckstalker on :
Rule #1 Always protect your capital.....
Posted by 10of13 on :
quote:Originally posted by buckstalker: Rule #1 Always protect your capital.....
Definite #1...
Rule 2...Do your OWN DD... Rule 3...Don't fall for the BS and Hype on the boards!!!
Posted by BuyTex on :
When you're starting out, keep a journal...
Posted by imakmony2005 on :
You will not always be right,TAKE YOUR LOSES,MOVE ON.
Posted by AgentGPF on :
quote:Originally posted by imakmony2005: You will not always be right,TAKE YOUR LOSES,MOVE ON.
If a stock bit Darvas on the ass, eventually he would move on and never play with it again. He would describe this as "stock personality," some liked him and some didn't.
The first rule is not to lose. The second rule is not to forget the first rule. - Warren Buffett
I allow for small dips, but I dont believe in holding onto losers. Sure it may come back someday, but I dont like losing money. STAY GREEN is my personal rule, which would be similar to trading inside a Darvas box. If it dips out of that box, goodbye stock.
Trade with a clear head, stress our influence can destroy your decision making.
Posted by AgentGPF on :
quote:Originally posted by 10of13: Rule 3...Don't fall for the BS and Hype on the boards!!!
When Darvas hung out with other traders he lost money. He insisted on making decisions completely on his own by observation of stock movement, simply listening to anyone else is what caused him huge losses. Which would be akin to saying, stay off of the boards. Most people obviously just resort to doing their own DD, no matter how good something looks it could be a loser, because stock price is almost like a voting system. It doesn't matter what the facts are.
Darvas traded based on stock movement, not opinions. Sometimes later though he would notice why a certain stock flew up, i.e. filtered cigarette company doing very well because the public expected it was possible that filters would greatly reduce cancer - which was later found untrue.
Posted by permanentjaun on :
I think people have misunderstood the meaning of my post.
I was asking more about the common sense that people throw out the window when it comes to money.
I mentioned "Volume precedes price" because in large part it does ring true. Yes, there are plenty of instances when stocks fall on large volume. Everyone should look at other indicators to tell what type of volume is occuring. Accumulation or distribution.
A stock does not move without volume though. This is why we have trading filters that indicate to us when stocks break 20 or 50 day volume averages. They're meant to draw our attention to the stock because volume can be a good leading indicator.
So then I ask the following question. Why are 52 week highs and lows also trading triggers? Why are block trades?
The question could be, what is important in a stock? Why are these triggers important? There is something basic about these triggers that tells a tale about why people want to find these stocks. What are these signals saying? What are other basic signals such as those are there? Matt
P.S. - You can thank me later for yet another ambiguous post. :-)
Posted by BuyTex on :
what did you mean by that, Matt?
just kidding--as I understand it, the "volume precedes price" dictum is one of those self-evident truisms that actually has more subtle revelation. In other words, I'm always amused when I see remarks like, "All we need is volume!" Doh...
To me, the deal is to distinguish volume sells in a dilutive situation from volume accumulation by MMs. Once broker/dealers have enough accumulated, they're more willing to "let 'er rip" cuz they're also trading for the firm.
In that sense, a 52-week low may certainly signal such a condition...your basic "bounce" or "bottom" play, eh? Too simplistic? maybe...
At the other end of the spectrum, a new high may signal a break through previous resistance, which as you know makes previous resistance new support.
The reason I mention keeping a journal, especially starting out, is we often "learn a bunch" in an overwhleming time-frame, then tend to forget what we started out to do. The revelations you garner as you go along can be quite valuable later. This can be a "hobby" or a serious, cautious pursuit...again as you know, and demonstrated by your posts.
Posted by plni on :
BASIC RULES FOR TRADING 1.protect your princaple. 2.do your own dd and do it well. 3.dont buy on anyones advice. 4.dont believe unsolicited emails. 5.develope a strategy and rules on paper. 6.keep up on current events for new trends. 7.hold on to your sense of humor. 8.and be patient.
Posted by permanentjaun on :
BuyTex - In my opinion, the reason we have triggers and filters is because to make it in the market all we need to figure out is what everyone else is thinking.
It's like a game of rock/paper/scissors. If you know the person is going to throw paper, would you ever throw down rock?
That is how I see how the market is played. We create the resistance and support by believing previous highs and lows can be support/resistance. As soon as we accept the thought process, then it becomes a reality.
If you know everyone will be buying this stock soon because it's prepping then would you want to sell now or buy now before the run? Try and stay one step ahead of the game.
This thread is going off in so many tangents.
Something I think of when I see the 52 wk low/high trigger, however is that why do people believe a stock that has fallen and fallen to a 52 week low will suddenly pop? In the past 52 weeks the history is down. What have people convinced themselves that makes a 52 wk low a good play? Why does it bounce?
Now I don't even know what I'm asking anymore. Thanks buytex! Or should that be. Thanks Buytex?
Posted by BuyTex on :
Listen, I appreciate these questions...I *think* I understand what you're attempting--namely, to actually have knowledge/understanding rather than superficial "-isms" rattling around in your head...
the 52-week deal is convenient because we tend to think in -- and "recognize" -- annual cycles. So, yeah, there's something to self-fulfilling prophesy... Yet, that wouldn't have helped "horse" stock once automobiles took over... (disruptive technology, etc, etc). So a 52-week low, in and of itself, is no guarantee of anything--who's to say it won't post another new low the next day? the next week? Stay with it--I'm confident you'll emerge with insights. Just lemme know what they are, lol!
Posted by permanentjaun on :
I know nothing is a guarantee. I'm just trying to understand what matters most to people from a TA side.
This is why there are pumpers/bashers. It's not how well the stock is in reality, it's how people view the stock. It could be a piss poor stock, but with the right attention and praise it could rocket. I believe if one gets a collective understanding of what most people think then they'll be successful at this game. Matt
Posted by BuyTex on :
agree re "trading public" but also think more important--esp in pennies--to get on same side as MMs.
So I guess I'd say basic rule #1 is: Join 'em, don't fight 'em...
Posted by imakmony2005 on :
Matt, wouldnt you say if a stock hits a new 52 week low its still going down and will more than likly keep going down, but when it hits a 52 week high and gos threw it, its headed up? I just read a great book called, Lessons from the greatest stock traders of all time. Five investing legends, Jesse Livermore, Bernard Baruch, Nicolas Darvas, Gerald Loeb, William o"neil, great book.
Posted by Doniboy on :
How can you write a book titled the greatest stock traders ever and not include Warren Buffet?? He is the best who ever lived, without doubt.
Posted by permanentjaun on :
imak - Ha. This is true. Of course you could also say it is a dangerous play because pretty much everyone in the stock has profit to take. Could be ready for some downfall ya? Matt
Posted by imakmony2005 on :
OH, Doniboy, Ive read Warren Buffett speaks, The Millionaire mind, Buffettology, and about 25 more.
Posted by imakmony2005 on :
Matt, yes this is true, but seems to work about 80% of the time for me.
Posted by plni on :
from ihub mm codes = 100 > I need shares 200 > I need shares badly but dont take it down to get em 300 > Take the price down to get shares.... 400 > Trade it sideways based on Supply and Demand 500 > Gap one way or the other, usually to the direction of the 500 trade. Sometimes -if in the middle -keep the price right where it is.
Posted by Fredgrasshopper on :
A MUTUAL FUND OF PENNIES...MORE IS BETTER Some of these companies can slaughter you. Spread the money out. I bought all 50 stocks on the Canadian index(just to track) and am up 82% since Jan 12 2006. Not buying or selling anything since setup. I have also done this with otc most active. The winners more than carry the loosers.
Posted by permanentjaun on :
I agree diversification is safer, although I believe on focusing my efforts and DD to find only the best picks. It may seem riskier, but it makes me learn and understand. Matt
Posted by imakmony2005 on :
In the pinks, its momo and news in and out.Get payed.
Posted by Repoman75 on :
My rules:
1. Buy low, sell high. 2. Hogs get fat, pigs get slaughtered. 3. If you want a friend, get a dog. 4. Buy on the rumor, sell on the news. 5. You win some, you lose some, but you keep on fighting (don't give up - don't lose your capital) 6. Never get emotional about stock 7. Don't chase a runaway train, and don't catch a falling knife.
![[Big Grin]](biggrin.gif)