Stock market trading

[aodenkou]

We have relied on advice from professionals for years and have not done all that well. I have been reading and looking after a portion of my portfolio now and I watch it closer than the "professional". I do not day trade, but I may be in and out of a stock in as short as a day or days - or I may keep it for some time.

What I mean by this is I look for an equity I want to invest in and watch it. I want a stock that is trending up, and I watch for that equity for an entry point I am comfortable with. Then and most important for my mental health is I set a limit on the amount of money I am willing to bet on the equity. Say I invest $100, how much am I willing to allow that equity to decrease in value before I say "I am out of here"? Let's say I am willing to take a 10% loss, that would be a $10 bet. So when the order fills I set a stop loss order so that if the equity goes down to $90 the stock is sold. Could it go for less? Sure, once the order is initiated it may be $89, or $88, but it does get sold. AND it stops you from losing your shirt.

So let's say I picked correct and the stock goes up, let's say $10, so then I have now have an investment of $110. Now I will change my stop loss order to $100 and if it goes down it sells and I break even.

What if it goes up a bit more to $120? Well I then set the stop loss at $110 and lock in the 10% profit. You may become more active in watching your stocks - setting your stop loss orders. Or some trading platforms will allow you to set ups a 10% trailing stop loss (or any % you chose). NEVER BUY A STOCK WITHOUT PUTTING IN A STOP LOSS ORDER! It will save you money in the long run. You get emotionally invested in a stock and your choice. You study and buy a stock, then in goes down. You say to yourself - Oh I was smart and it's down just a bit, it will go up tomorrow. BUT, it goes down some more, and you think well it will go up tomorrow. And before you know it the stock has dropped 50% or more, and at that point you think - oh what the heck it will come back up and it drops more. Think GM, City Bank, AGI and others. But if you would have had a 10% stop loss set you would be down 10% not an extra 40% and that's a LOT to make up.

Then you have the ability to sell a covered call on a stock. People do that when a stock is moving to the side or slightly up. Using covered calls you can pick up 3 - 5% per month, perhaps even more. So if you get a conservative 2% per month that 24% per year....... I have one stock I have been making 6% on each month now for about 4 months. So I have turned 24% in 4 months, plus the stock has moved up slowly each month and I have picked up that added gain as well.

Then you can sell short, and there are a lot of people out there that make a lot of money on that. Selling short you make money when the stock goes down. If you would have done that with GM and others you would have made a ton of money.

There is no reason you can not study and learn enough to make some good choices on investing on your own. You will watch your money a lot closer than a "professional".

Look up MACD - Gerald Appel has a book out there on using the MACD worth a read. Learn how to read charts - esp candlestick charts. It does not take a genius to see when a stock is moving up - to the side - or down.

 

[GregB]

If you are going to try and use MAC

Have a look at this one too:

http://www.advisorperspectives.com/newsletters09/31-LTE-0804092.php

This is our director of research letting some air out of MAC in a professional journal. Just be careful out there my friends...

 

[GregB]

But actually... much more important than the trading question:

Why CAN'T one make soap from "pig tallow"?

 

[Sue]

But actually... much more important than the trading question:

Why CAN'T one make soap from "pig tallow"?

Pig fat is lard and is used to make soap. It makes a hard bar. The only problem is, you smell like a pig.......just kidding. If you buy a whole pig and have it processed, you also receive a big tub of lard. Google 'lard soap', there are many recipes that use it.

Lard makes a good cold process soap but is better with the addition of other oils. Lard is cheap and you could make a lot of soap from a tub of it. It would be a good choice if someone wanted to give soapmaking a try without spending a lot. You can use anything for a mold including a pizza box; lined with wax-side-up freezer paper.

You can also make soap from 'Crisco'. Most any fat will do but each oil or butter adds it's own qualities to the finished product. This link has a few oils and their properties:
http://www.colebrothers.com/soap/oils.html

If you want to check other oils or additives,

Google: cold process soap + (oil/additive name)

Sue

 

[GregB]

Not to worry - I am definitely not going to make my own soap. I just love the smell and taste of bacon so shaving with "pig tallow" it had me briefly intrigued.

the fact that it is actually used, and smells nothing like bacon sort of takes away the fantasy

ah well... I actually had a look at your site to see who / what you are up to. I know your products are very highly regarded around here. I will likely make an order when I get through some of the stuff I already have.

G

 

[Wendy]

You will watch your money a lot closer than a "professional".
.

That is the hard truth there. You would think the professional who receives commissions off of my money would be watching more closely. I guess they have too many clients to watch each individual.
Thank you for the good advise also it makes good sense.

 

[aodenkou]

That is the hard truth there. You would think the professional who receives commissions off of my money would be watching more closely. I guess they have too many clients to watch each individual.
Thank you for the good advise also it makes good sense.

Hi Wendy,

From my perspective - and please take this with a grain of salt - I feel that our broker does watch our portfolio to an extent. But, no matter if the market goes up or down they get paid. If we sell or buy, they get paid. Sure if the portfolio goes down they get a bit less, but then they have more than one client.

It seems there are two major groups of people that will advise you. Those that believe in fundamental analysis and those that are in the technical analysis camp. Personally, I am spending some time and cash to learn more about the technical side of the market. I will not discount the fundamentals, and do look at them. I try to look at both before I make a purchase and try to make as an informed decision as possible.

BUT - let me say this again - and again - be sure to have in a stop loss order on all stocks you may purchase and move them up as you make more profit. If you are stopped out (it sells on your order) be happy that it has sold EVEN IF the stock moves back up. It protects your profit AND you have set a limit on a loss you are willing to accept (your willingness to bet an specific amount of money that your choice in a stock purchase was right).

Have a look at the web sites about Stop loss orders the first one is really a good one to read.

http://www.investopedia.com/articles/stocks/09/use-stop-loss.asp
http://www.stocktradingtogo.com/2009/01/06/stop-loss-order-tips-for-success/

I mentioned earlier that I do covered calls, and had done very well with one of them. Anyway I sold a covered call at $63 and the stock right now is $76.59 so it's gone up in price quite a bit. I will have to sell the stock for $63 but I received a premium on the stock so I will have made about 7% in 3 weeks. If I would not have sold the call, I would be able to sell the stock for $76.59 and would have made more money. BUT - there are 3 kinds of people in the market Bulls - Bears - and Pigs. I am going to be happy with making 7% and not worry about "I could have made more if......" I could have lost money, but I made money. Not as much perhaps, but I made money. And that's the most important thing.

 

[Wendy]

"I could have made more if......"

That took me a little while to get through my head. I think it is stuck pretty deep now. Thanks for the links I will check it out.

 

[aodenkou]

That took me a little while to get through my head. I think it is stuck pretty deep now. Thanks for the links I will check it out.

Hi Wendy - what did you have a problem with? I'll try to explain, that is if I understand. I have been doing a lot of reading and have gone to a couple of classes on this stuff. It's shown me that there is a lot I don't understand and there is a lot to learn. I have a better understanding than I did 6 months ago.

 

[Wendy]

I used to be the one saying if I would have waited another hour, day, week etc. Now I have learned to take a small piece of the pie and so what if I could have received more if I waited I am just happy not losing on a stock. My husband on the other hand beats himself up over this stuff. He falls in love with his stocks.

 

[aodenkou]

I used to be the one saying if I would have waited another hour, day, week etc. Now I have learned to take a small piece of the pie and so what if I could have received more if I waited I am just happy not losing on a stock. My husband on the other hand beats himself up over this stuff. He falls in love with his stocks.

Hi Wendy, I have fallen in love with stocks and have lost my pant's - and shirt. Since I have started putting stop loss orders on I have managed much MUCH better. I will set a % of a loss I am willing to stand when I make an initial purchase and it's money I am willing to bet. Once I start to make money on a stock I move up my stop loss to break even, then to protect profit. If the stock trends up I make money and move the stop up higher and higher. With a stop loss it takes away emotion and it forces you to sell. If you really love the stock you can wait for a pullback and purchase once it starts to move back up (I wait two days of a stock moving back up before I buy back in and the risk/reward is 2:1) http://www.investopedia.com/terms/r/riskrewardratio.asp gives you a quick idea on what I mean by risk/reward.

http://www.therealtimetrader.com/understandingriskreward.htm has some very interesting points - esp what you have to make up from a loss.

 

[SiBurning]

"flipping" is difficult for avg investor, takes a lot of time and energy. That said, I disagree that stock trading should be left to the experts. If you are willing to spend the time to educate yourself on the workings of the world markets and faithfully monitor current events and business news (i.e. read WSJ cover to cover, daily) you can learn what you need to do quite well.

Mid-term, I am looking at pipeline companies, companies involved in what I expect to be the coming Nuclear power boom [constructors, manufacturers, etc], and domestic non-gold raw metal producers.

True, no matter how you slice it.

 

[BD1970]

My recommendation is to follow good underlying economics. Research companies with good balance sheets and non cyclical stock prices (such as Mcdonalds, Pepsi, etc). Apple was a good example of this in mwhen it was trading around $86 at the beginning of the year, hammered by the recession. But, it was a good company, so the market corrected and set it at a fair value, which is now $165. Order annual reports and research companies before buying into them and you you can make a substantial sum of money. Warren Buffet teaches this investment principle of value investing. I wish you luck...

Also look for a high amount of inside ownership by the senior management. That means their money is riding on the company's performance right along with yours.

 

[BD1970]

Hi Wendy,

From my perspective - and please take this with a grain of salt - I feel that our broker does watch our portfolio to an extent. But, no matter if the market goes up or down they get paid. If we sell or buy, they get paid. Sure if the portfolio goes down they get a bit less, but then they have more than one client.

A broker will make you just that...broker!!!

 

[velvetgoldmine]

so what if I could have received more if I waited

Quite right Wendy! A profitable trade is a successful trade, however small. And a million small successes makes.......