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NLST - Hurricane Stocks postition now into Sep/Oct
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[QUOTE]Originally posted by Purl Gurl: [QB] "I'm still learning about stocks every day, so there will be mistakes on my end." You are an honest person and will do well. Like you, I am still learning after twenty years. Yes, like you, I still make mistakes, sometimes very stupid mistakes. When I do make those stupid mistakes, I am stupid. Here is a classic example of how we make stupid mistakes without truly being stupid, and a classic example why we must keep learning. Cannot remember the exact year, sometime in the early ninties, maybe ninety-three or ninety-four, a well known company, Raytheon, is opening a new production plant down in Temecula, close to our hometown. Raytheon is doing pretty good and keep in mind this is back when newspapers where about the only source of financial information. Through our local paper, I read articles about Raytheon, come to realize this company is in a high growth stage; share prices moving up. The company announces a forward split, three shares for every one share you hold. I know the share price will move back up to a level before the split. I buy a lot with our family money, the stock splits, prices move back up, I earn about three-hundred percent profit for our family in less than a month. Since then, over the years, I periodically play Raytheon based on a belief this is a solid and very reputable company. Very recently, I am reminded I am stupid and reminded I still have much learning to effect. The SEC busts Raytheon for fraud and Raytheon is fined millions of dollars. I never saw that coming. I am stupid for not taking notice of tell-tale signs there was "something not right" about Raytheon. Just dumb luck our family was not vested. I was wearing "stock blinders." I came to trust Raytheon so much, I quit looking for any negative or suspicious events. This is what some refer to as being "in love" with a stock. This is how many lose money and this is why people are stupid, just as I was stupid to believe Raytheon to be pure and chaste, beyond corruption. Yes, learning is never ending process and our stupidity will never end; we are doomed to be stupid for the rest of our lives. It is when we do not realize we are stupid we become truly very stupid. "As for most people on here, I bought the stock expecting Hurricane Chris to pop it up. Speculation brought it up to .60. I was going to sell it at .55 at least, but it dropped way too fast, and I still have it." Happens all the time, to everyone, self included. My strategy is to move in and out of a speculation stock, many times, as fast as possible. I am not playing hurricane stocks this year for reasons discussed just prior. However, other stocks exhibit the same behavior which I do play. Using your NLST price behavior as an example, my strategy would be to buy at .40 then sell at .45 per. Buy again at .46 then sell at .50 per. Buy again at .51 then sell at .53 per. Then quit. You can see for each buy and sell, I reduce the profit margin. This accelerates how fast you move in and out of a stock. As speculation stocks rise in prices, risks double, quadruple. Knowing this, seasoned traders work at narrowing the profit margin target to reduce risks through exposure of time held; smaller profits as prices rise, but consistent small profits over time. In this case example, I might lose money on my third trade, but enjoy healthy profits on my first two trades. The loss for my third trade is significantly smaller than my profits for my first two trades; a decent net profit after taking a final trade loss. Purl Gurl [/QB][/QUOTE]
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