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geokills
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The Problem with Penny Stocks & Stocks that Trade on Thin (Low) Volume [Re: ohmatic]
#11836222 - 01/15/10 04:11 PM (14 years, 16 days ago) |
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ohmatic: Correct. If you have less than $25,000 total equity in your brokerage account, and you day trade (buy and sell the same stock within the same trading session) more than 3 times within 5 consecutive trading sessions (business days), your account will be placed on hold for 30 - 90 days, during which you will be limited to closing positions only. Once restricted, you will only be allowed to open new positions at the expiration of the hold, or once your account reaches the $25,000 minimum equity value. Once identified as a pattern day trader, it supposedly takes three months of no day trading to lose the Pattern Day Trader classification and the related restrictions.
As CosmicLion noted, trading penny stocks - especially fractional penny stocks - is an easy way to lose your money as a company goes bankrupt. Sure, buying something at $0.001 and looking to flip it at $0.002 sounds like a good idea, but as noted, manipulation and lack of liquidity (low volume) stack the cards firmly against you. Note that stocks trade based on the relationship between a "bid" and "ask" offer, and a trade will only execute when the the bid is at or above the ask offer, or the ask it at or below the bid offer.
So for example, if you bid $0.001 to pick up 1,000,000 shares of XYZ (a $1000 investment), there may only be a small number of sellers asking that amount for their shares. This could result in only a small fraction of your trade getting fulfilled (say 10,000 shares), though you will still be charged the full trading commission from your broker unless you previously specified "all or none" on your order. If your trading commission is $10, this would result in an immediate loss of 50% (you would have paid $20 for $10 worth of stock). Likewise, when you look to sell at $0.002, there may be a bid for 10,000 shares at $0.002, but what about the remaining 990,000 shares you'd be left holding? After you've soaked up the demand for those 10,000 shares at $0.002, who's going to by the remaining supply you have to offer, and why would they bid up for it when it would be plain to see that your supply is far outpacing the available demand? Hence, the major drawbacks of trading light volume penny stocks.
To further illuminate the danger of trading penny or low volume stocks, let's consider GI_Luvmoney's suggestion of rags to riches as noted:Quote:
Look at the chart of XKN. http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=xkn&sid=0&o_symb=xkn&x=66&y=17
If you bought $200,000 worth back in March when it was yielding over 50%, you'd be a millionaire now and would be getting about $90,000 a year in dividends.
At quick glance, the stock has an average volume of 8,000 shares per day as reported by Google Finance. Today, the stock traded 2,900 shares which is only $60,465 of liquidity based on the closing price. If you really had bought $200,000 of XKN during the March low @ around $3/share, you would be holding nearly 67,000 shares. First off, as a retail investor, it would have been nearly impossible to acquire the 67,000 shares of XKN at the low because there wouldn't have been enough supply available at that price. Another way of saying this is that there was not enough liquidity in the stock to support such a large purchase without significantly driving up the share price in the process. This is supported by the fact that there were only 3 days where the daily volume (number of shares traded) exceeded 10,000 during the entire month of March. And yet, even with so few shares being bought, XKN still managed to close 98% higher on March 31 ($5.95) than it had been during the $3 close on March 5th.
So, let's say that hypothetically you did manage to get your 67,000 shares of XKN at around $3. You still wouldn't be able to sell out of your position without bringing down the stock price in the process, because the stock is just not liquid enough (ie. not enough volume) to support a single asking price for a block of shares as large as the one you'd be holding. If you attempted to unload 67,000 shares today, you might sell the first 500 shares around today's open of $21.20, but after that you would have soaked up the demand and would have to lower your asking price in order to conjure up additional demand. In effect, you would be flooding the market with supply, which in turn drives down the share price.
Yes, you might be able to take a disciplined approach by selling 1000 shares each day for two months, but who knows where XKN will be in two months, given that it's fluctuated over 15% just since the year began, and with only ~150,000 shares traded. Even if you do sell only 1000 shares a day, you would consistently be adding ~13% of additional selling pressure to the stock each and every day for two months straight. This would put enormous pressure on the shares. Put plainly, GI_Luvmoney's scenario is only a dream.
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GI_Luvmoney
Vote Republican!


Registered: 05/10/09
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Re: The Problem with Penny Stocks & Stocks that Trade on Thin (Low) Volume [Re: geokills]
#11836375 - 01/15/10 04:34 PM (14 years, 16 days ago) |
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I only bought 200 shares. I can't predict the future. Ford is doing pretty good. A lot of people are moving their money into bonds. Junk bond funds (high income) seem to be popular. Some that I own: PHB, JNK, HIX and HYG. I also own some MGB, RCS, TEI and some other bond funds. http://www.marketwatch.com/story/fixed-income-plays-for-february
Check out the Nuveen tax-free muni bond funds. http://www.marketwatch.com/story/nuveen-closed-end-funds-declare-monthly-distributions-2010-01-04?newsid=980734580&dist=bigchartssymb%3DNMY&sid=10150
http://www.nuveen.com/cef/DailyPricing.aspx You have to buy the funds that invest in your state for them to be both free of federal and state taxes.
Edited by GI_Luvmoney (01/15/10 04:36 PM)
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ohmatic
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Re: The Problem with Penny Stocks & Stocks that Trade on Thin (Low) Volume [Re: geokills]
#11839897 - 01/16/10 07:18 AM (14 years, 15 days ago) |
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Quote:
geokills said: ohmatic: Correct. If you have less than $25,000 total equity in your brokerage account, and you day trade (buy and sell the same stock within the same trading session) more than 3 times within 5 consecutive trading sessions (business days), your account will be placed on hold for 30 - 90 days
oki doki i check that.
Quote:
manipulation and lack of liquidity (low volume) stack the cards firmly against you. Note that stocks trade based on the relationship between a "bid" and "ask" offer, and a trade will only execute when the the bid is at or above the ask offer, or the ask it at or below the bid offer.
oook.
Quote:
So for example, if you bid $0.001 to pick up 1,000,000 shares of XYZ (a $1000 investment), there may only be a small number of sellers asking that amount for their shares. This could result in only a small fraction of your trade getting fulfilled (say 10,000 shares), though you will still be charged the full trading commission from your broker unless you previously specified "all or none" on your order.
WOW - i didnt know that i could actually just get some instead of what i want, good to know that there is this all or none thing, really good !
Quote:
If your trading commission is $10, this would result in an immediate loss of 50% (you would have paid $20 for $10 worth of stock).
totally get that.
Quote:
Likewise, when you look to sell at $0.002, there may be a bid for 10,000 shares at $0.002, but what about the remaining 990,000 shares you'd be left holding? After you've soaked up the demand for those 10,000 shares at $0.002, who's going to by the remaining supply you have to offer, and why would they bid up for it when it would be plain to see that your supply is far outpacing the available demand? Hence, the major drawbacks of trading light volume penny stocks.
now this i dont understand. are you telling me that, in a fictive scenario, i buy shares for 1000$ at opening, it would go up 100%, and i could find myself UNABLE to sell them again ?
but isnt that the idea of daytrading, same day, in out, please this point i dont get. i thought i could sell whenever i want?
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AroundtheSon
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Re: The Problem with Penny Stocks & Stocks that Trade on Thin (Low) Volume [Re: ohmatic]
#11840002 - 01/16/10 08:04 AM (14 years, 15 days ago) |
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someone has to want to buy your stock before you can sell it.
stick with companies whose stocks are valued over 5.00 dollars and you will save yourself some money - and probably make some!
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ohmatic
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Re: The Problem with Penny Stocks & Stocks that Trade on Thin (Low) Volume [Re: AroundtheSon]
#11840019 - 01/16/10 08:10 AM (14 years, 15 days ago) |
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Quote:
AroundtheSon said: someone has to want to buy your stock before you can sell it.
stick with companies whose stocks are valued over 5.00 dollars and you will save yourself some money - and probably make some!
but how do i know if someone wants it ? say i bought and wanted to sell what would happen ? error message from the programm telling me that noone wants it ?!
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ArmFromTheAbyss
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Registered: 10/09/02
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Re: The Problem with Penny Stocks & Stocks that Trade on Thin (Low) Volume [Re: ohmatic]
#11840062 - 01/16/10 08:26 AM (14 years, 15 days ago) |
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Quote:
ohmatic said:
Quote:
Likewise, when you look to sell at $0.002, there may be a bid for 10,000 shares at $0.002, but what about the remaining 990,000 shares you'd be left holding? After you've soaked up the demand for those 10,000 shares at $0.002, who's going to by the remaining supply you have to offer, and why would they bid up for it when it would be plain to see that your supply is far outpacing the available demand? Hence, the major drawbacks of trading light volume penny stocks.
now this i dont understand. are you telling me that, in a fictive scenario, i buy shares for 1000$ at opening, it would go up 100%, and i could find myself UNABLE to sell them again ?
but isnt that the idea of daytrading, same day, in out, please this point i dont get. i thought i could sell whenever i want?
Let's say you place a sell order. Your broker has to match your order with an opposite buy order. The ratio of buy orders to sell orders determines the price. However, small cap or penny stocks are not liquid like blue chip stocks because fewer people trade them. Therefore, if you buy a huge chunk of a penny stock it might be difficult to actually find somebody else who will buy your shares. The only way you would be able to liquidate your shares is by lowering your asking price.
Usually there is a "market maker," a guy who holds a stash of shares and matches buy/sell orders. They will sometimes step in a buy your shares if nobody else will in order to keep the market stable and liquid.
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ArmFromTheAbyss
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Re: The Problem with Penny Stocks & Stocks that Trade on Thin (Low) Volume [Re: ohmatic]
#11840091 - 01/16/10 08:38 AM (14 years, 15 days ago) |
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Quote:
ohmatic said:
Quote:
AroundtheSon said: someone has to want to buy your stock before you can sell it.
stick with companies whose stocks are valued over 5.00 dollars and you will save yourself some money - and probably make some!
but how do i know if someone wants it ? say i bought and wanted to sell what would happen ? error message from the programm telling me that noone wants it ?!
Yeah, I think so. I can't speak from experience though. What trading platform do you use? You could probably call them and they'll give you the details.
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ohmatic
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Re: The Problem with Penny Stocks & Stocks that Trade on Thin (Low) Volume [Re: ArmFromTheAbyss]
#11840096 - 01/16/10 08:41 AM (14 years, 15 days ago) |
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Quote:
ArmFromTheAbyss said:
Quote:
ohmatic said:
but how do i know if someone wants it ? say i bought and wanted to sell what would happen ? error message from the programm telling me that noone wants it ?!
Yeah, I think so. I can't speak from experience though. What trading platform do you use? You could probably call them and they'll give you the details.
so far i am only watching, no real cash involved at all atm.
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CosmicLion
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Re: The Problem with Penny Stocks & Stocks that Trade on Thin (Low) Volume [Re: ohmatic]
#11840342 - 01/16/10 09:43 AM (14 years, 15 days ago) |
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Quote:
ohmatic said: but how do i know if someone wants it ? say i bought and wanted to sell what would happen ? error message from the programm telling me that noone wants it ?!
This is often called the Bid\Ask Size or Lot Size. Hear me out on this post and I will get to how these correlate back to a trade. Lets take a look at what a Bid Price and Ask Price really are though.
My broker will display a Bid Price & Ask Price. It will also show a Bid Size and Ask Size.
The Bid Price is the price in which the buyers are saying "I will pay THIS much money" and the Ask Price is the price in which sellers are saying "I will sell it for THIS much money" and the difference between the two is called the Spread.
By the nature of this system the Bid Price will always be lower then the Ask Price. Buyers always put in the cheapest bid they think they can get while sellers are always asking the highest price they think they can get. This is where the battle that drives a stocks price gets waged.
Say for instance the Bid Price is $5.64 and the Ask Price is $5.68. This means that buyers are ONLY willing to pay a MAX of $5.64 and the Seller is going to sell for a MINIMUM of $5.68. If the sellers cave and sell below their Ask price and down to the buyers Bid price then a trade is made and the overall value of the stock will now be lowered down the the Bid price because "Hey, now people are openly selling it for what we were wanting, lets see if we can get them to sell it for less" So now the new Bid Price is lower because the buyers think they have gotten control over the sellers and have gotten them in a selling frenzy.
Now the sellers, worried that they won't be able to sell their stock without lowering down from their $5.68 selling point, are putting their new Ask Price at $5.64 while the new Bid Price is at $5.60. This is because the "last completed trade" by anyone was a Sell at $5.64 because someone caved and needed it to be sold, even at the 4 Cent loss. That is called the "Last Price" that the stock actually traded at, this is the number you see on Google Finance. This play and battle between Bidders (Buyers) and Askers (Sellers) is the constant fight that dictates which direction price will move.
So now to Bid Size and Ask Size.
Say someone is creating the Bid Price saying "I will buy 400 shares at $4.20 per share" that 400 shares is their Bid Size.
Say someone is creating an Ask Price saying "I will sell 300 shares at $4.22 per share" that 300 shares is the Ask Size.
This means, assuming these two people are the only driving forces in the market, any person has two options. They can sell 400 shares at $4.20 per share or they can buy 300 Shares at $4.22 a share. Want to buy 500 shares? Your out of luck and will only be able to buy 300 Shares at $4.22 as the other 200 might cost more.
Lets see an example based on this scenario. Lets say you want 1,000 shares of an under-traded Low-Volume XYZ stock.
The current Ask Price is $4.22 and the current Ask Size is 500. This means if you wanted to buy RIGHT NOW you would have to pay $4.22 for 500 shares.
Now you only have 500 shares, paid full commission, and are still left with 500 more shares that you want. But now what happened? The seller is thinking "Well I just suckered that fool into paying $4.22 for my 500 shares I was offering, they bought it they must be hungry, I'm going to sell the NEXT 500 for $4.25"
So now the seller is putting an Ask Price of $4.25 with an Ask Size of 500 again. You buy their remaining 500 shares and and pay commission again.
Now you have 1,000 shares of XYZ. You paid $4.22 per share + Commission for the first 500 shares and you paid $4.25 per share + Commission for the other 500 shares.
As stated by GeoKills you can place an "All-Or-None" order to bypass the multiple commissions.
You could place an "All-or-None" order and place a Bid for the stock. Your Bid Price could be at $4.22 and your Bid Size would be 1,000 shares.
You could place this order and WAIT. Others will see you are offering a Bid Size of 1,000 shares for $4.22 and the sellers will come to YOU if they think it is acceptable to sell at that price. They will come and not be able to buy from you unless they are purchasing the full 1,000 shares.
This is fundamentally how the market moves and how one can choose to enter it. If you want to Buy stock and Buy it now, just Buy stock for whatever the current Ask price is. This is what the sellers are selling it for, if you want it now, you can have it at this price.
If you want to score a better deal you could place a Buy order at the Bid price like everyone else and wait for the Sellers to cave-in and come down to your level and Buy at the lower price your asking. This may take some time, sometimes a few minutes, sometimes a day or two, sometimes price will only move up and never come back that low and your missed your chance to Buy in where you wanted.
For most non-aggressive traders you probably want to get in the habit of Buying stock at the Ask Price and Selling stock at the Bid Price. This will ensure all your trades get executed immediately and with a longer-term strategy you don't have to worry about a few cents on the spread.
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Earth's Essence
Edited by CosmicLion (01/16/10 10:51 AM)
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ohmatic
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Re: The Problem with Penny Stocks & Stocks that Trade on Thin (Low) Volume [Re: CosmicLion]
#11840538 - 01/16/10 10:36 AM (14 years, 15 days ago) |
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+5 lion +5 !!!
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geokills
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STOCKS - Defining Risk - Support & Resistance [Re: CosmicLion]
#11840656 - 01/16/10 10:57 AM (14 years, 15 days ago) |
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Quote:
CosmicLion said:
You could place this order and WAIT. Others will see you are offering a Bid Size of 1,000 shares for $4.22 and the sellers will come to YOU if they think it is acceptable to sell at that price. They will come and not be able to buy from you unless they are purchasing the full 1,000 shares.
This is fundamentally how the market moves and how one can choose to enter it. If you want to Buy stock and Buy it now, just Buy stock for whatever the current Ask price is. This is what the sellers are selling it for, if you want it now, you can have it at this price.
If you want to score a better deal you could place a Buy order at the Bid price like everyone else and wait for the Sellers to cave-in and come down to your level and Buy at the lower price your asking. This may take some time, sometimes a few minutes, sometimes a day or two, sometimes price will only move up and never comes back that low and your missed your chance to Buy in where you wanted.
This is an important concept for new traders that deserves some more exploration. Each buy or sell order you place with your brokerage has an expiration date. The default is typically the end of the trading day in which your order is placed, but you can also specify an expiration that is several days out, even months or a year! That way, you won't have to always be watching the market to see when your buy or sell point is reached. Of course, it is possible that your order will never get fulfilled and the stock will move against you during the time period you specified. This can be particularly dangerous if your order expiration is more than a few days out, as a stock can move considerably during that time and you may be left without a position, or stuck holding a big loser that you couldn't unload at your asking price.
So comes into play the most important part of trading and that is risk management. There are different reasons for trading a stock. One reason could be a purely technical thesis based strictly upon the stocks recent behavior (price action). Another reason could be a fundamental thesis based upon the business/sector/economic fundamentals for the company you intend to trade. Often times, it is a combination of both. When opening a new position (buying stock) in your portfolio, it is usually best to trade a company for which you have an idea of how they will be performing in the future, and for which you can define a maximum loss (risk) before you even make the purchase.
Defining your risk tolerance, or the maximum loss you're willing to take on a trade, is very important because if you hold a position that loses 50% of its value ($1000 x 50% = $500), you'll need to make a 100% gain just to get back to even [$500 + (100% x $500) = $1000]. On the other hand, if you limit your losses to let's say 10% of the original value of your investment ($1000 x 90% = $900), you will only need to make back a little more than 11% to get back to even [$900 + (11.11% x $900) = $1000]. This should illustrate how sustaining large losses will make it extremely difficult to be profitable, and thus why risk management is so ridiculously important.
So how does one define risk?
This is a discussion that could persist into incredible and arduous detail, so I will do my best to be brief in touching upon the primary principles of "support" and "resistance". Simply stated, the price level at which a stock is consistently bought (i.e. the price that it does not tend to fall below) is known as support. Likewise, the price level at which a stock is consistently sold (i.e. the price that it has a hard time rising above) is known as resistance. It is important to recognize that once a stock breaks below a strong support level, that level becomes the new resistance level. Likewise, if a stock breaks out above a clearly defined area of resistance, that resistance level now becomes the new support level. There can be several support and resistance levels on any given stock, some stronger and some weaker, and you will have to determine these levels by looking at a chart. In truth, the task of defining support and resistance is more of an art than a science!
The basic principle is to buy a stock when it is near a support level OR when it has broken out above a resistance level (which then becomes support). This allows you to clearly define your risk by placing a Sell Stop just below the support level you have identified, so that if the stock falls back below that level, you are not left holding a loser. On the other hand, if support holds and the stock bounces, your trade is almost instantly profitable!
To sell a stock, you may want to sell 25% of 50% of your position as it approaches strong resistance, so that if it falls back from that level, at least you have booked some profits that you can choose to re-invest should the stock fall back to support. If on the other hand the stock continues higher and breaks out above resistance, that could also be a buying opportunity to re-purchase the 25% or 50% of your position that you had previously sold, while simultaneously re-defining your risk (moving your Sell Stop up to the new support level).
Here are a few examples of support and resistance taken from some of my older posts in this very thread...
In this chart, one can clearly see the support level at which this down-trending bank index tended to bounce:

In this chart of Amazon, you can see one clearly defined support level, but two potential levels of resistance:

A chart of oil, indicating two support levels that are meeting one another, which tends to further strengthen the support of that level:

Here's a few more...


This one illustrates how it can sometimes be difficult to choose a given support level:
Ultimately, it is up to you to decide what your risk tolerance is, and where you will place your stops in order to define your risk. The most important part of trading a stock is finding a suitable entry where you can easily define risk. Is that last chart of Morgan Stanley a good candidate? It's pretty sloppy if you ask me, I would much rather initiate a trade on a stock that looks like this:

In the above scenario, you can buy as soon as you confirm a breakout (a higher close above the current level of resistance, indicated by the top green arrow). Or you can buy if the stock pulls back to support at the 50 day moving average (the thin red line that it has bounced off of numerous times previously). Either of these buy points allows you to set a close stop, either just below the breakout level (prior resistance) or just below long-standing support (the 50 day moving average).
I hope that gives you new traders something to chew on. I'm down with a killer flu, so maybe I'll get around to updating the first post in this thread to include some of this detail. Those of you who may be new to this topic, should go and check out the first post as it will lay out some general guidelines that all investors should be mindful of.
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GI_Luvmoney
Vote Republican!


Registered: 05/10/09
Posts: 939
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Re: STOCKS - Defining Risk - Support & Resistance [Re: geokills]
#11879919 - 01/22/10 03:53 PM (14 years, 9 days ago) |
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tekramrepus


Registered: 02/20/02
Posts: 2,253
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Re: STOCKS - Defining Risk - Support & Resistance [Re: GI_Luvmoney]
#11887992 - 01/23/10 10:08 PM (14 years, 8 days ago) |
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What do you guys think about William J. O'Neil's strategy, which he calls CAN SLIM (acronym) So far, Im a few chapters into his book "How to Make Money in Stocks", and I'm studying it as a novice investor. I'm completely new to stocks, and learning everything from the ground up. I really like the book, and his system makes perfect sense to me. Anyone care to share their opinions on this system?
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geokills
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Re: STOCKS - Defining Risk - Support & Resistance [Re: GI_Luvmoney]
#11894870 - 01/24/10 09:55 PM (14 years, 7 days ago) |
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I haven't done a ton of research on those names GI_Luvmoney, but out of your three suggestions, GOV is by far and away my favorite. It's the only one that I would consider investing in for myself, as regional telcom and private equity firms don't do it for me.
Re: supermarket & William O'Neil's "Can Slim" strategy;
I'm not familiar with it, suffice it to say that there is no universal strategy that works for everyone. It's a great idea to learn as much as you can from others with experience, but don't be too quick to take their word as the gospel for your own trading behavior. You will learn over time what type of trader/investor you are, and you will ultimately have to build your own strategy based upon your availability, investment time frame, capital and risk tolerance. I firmly believe that this is the only way to realize continued success in the market.
There is no substitute for experience. If you aren't in the market now but would like to be, start to develop your strategy with fake money and mock portfolios.
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tekramrepus


Registered: 02/20/02
Posts: 2,253
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Re: STOCKS - Defining Risk - Support & Resistance [Re: geokills]
#11896068 - 01/25/10 01:36 AM (14 years, 7 days ago) |
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Thanks for the quick reply geokills, and also, thanks for the wonderful thread. I've been enjoying reading parts of it everyday for the past few days.
I like your advice too, it makes lots of sense. I am planning on investing 500-1,000 in a few months for my first investment in the stocks, but starting in a few day, I'm going to be doing exactly what you said for. For a month or two I'm going to pick stocks and invest on paper without real money, and see where that takes me first.
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Trance104
Businessman


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Re: STOCKS - Defining Risk - Support & Resistance [Re: tekramrepus]
#11896847 - 01/25/10 07:53 AM (14 years, 6 days ago) |
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Some brokerages offer you virtual accounts. You can set how much money you start off with, etc. You might want to look into that.
-------------------- Can't stop the Trance! Dance!! DANCE!!! A good archive of Trance music to listen to when you want to relax or trip with. www.trance104.com
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geokills
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Stock Update for January 25, 2010 - SSO, AAPL [Re: Trance104]
#11897547 - 01/25/10 11:08 AM (14 years, 6 days ago) |
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Just a quick note that I picked up a medium sized position in the ProShares Ultra S&P500 (SSO), a leveraged ETF that returns 2x the daily movement of the S&P 500. This is a short-term trade, to play off of the "three day rule" popularized by Dan Fitzpatrick of StockMarketMentor.com, that after three heavy down days (or up days), it is likely that we will get some type of inverse movement. Because the market gapped higher today, it was easy for me to define my risk by placing a STOP on this position just below yesterday's intraday low of $36.56, while I will look to sell the position as it approaches $39, a previous level of support since the beginning of the year, that has now become short-term resistance.
Also a quick note on Apple (AAPL). The stock is trading well today, bouncing off of $200. Earnings are due after the market close which I believe will be good (caveat emptor: good earnings have been sold off this quarter for some other companies!). If Apple falls decisively below $200, I will be bailing on half of my position.
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GI_Luvmoney
Vote Republican!


Registered: 05/10/09
Posts: 939
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Re: Stock Update for January 25, 2010 - SSO, AAPL [Re: geokills]
#11899198 - 01/25/10 03:54 PM (14 years, 6 days ago) |
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Edited by GI_Luvmoney (01/25/10 03:58 PM)
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Hotnuts
old hand



Registered: 02/26/05
Posts: 3,436
Loc: Wild Blue Yawnder
Last seen: 25 days, 13 hours
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Re: Stock Update for January 25, 2010 - SSO, AAPL [Re: GI_Luvmoney]
#11901298 - 01/25/10 08:34 PM (14 years, 6 days ago) |
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Be careful. Futures are getting smacked, on the news. http://www.reuters.com/article/idUSTRE5BF27F20100126
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geokills
∙∙∙∙☼ º¿° ☼∙∙∙∙


Registered: 05/08/01
Posts: 23,417
Loc: city of angels
Last seen: 6 hours, 21 minutes
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Stock Update for January 26, 2010 - SSO, AAPL, GOOG, QTM + Market Thoughts [Re: Hotnuts]
#11905088 - 01/26/10 12:27 PM (14 years, 5 days ago) |
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What a difference a day makes!
My position in SSO has held, though I was close to ditching it during the selloff into yesterday's market close. However, as I have already defined my risk with a STOP placed below Friday's low of $36.50, I've been kept in the position without much stress or worry. I don't really believe that SSO is going to make me a ton of coin at this junture, but the market did get pretty oversold and because there was a clear definition of support at $36.50, I decided to take the position just to keep me excited!
AAPL is delivering big time today after solid earnings last night that were initially confused by new accounting methods that resulted in much higher earnings due to booking the complete revenue for sales of the iPhone up front, rather than amortizing the revenue over the following 8 quarters as had previously been the case. GOOG is also seeing some confirmation of strength such that we can now define support below Friday's low of $534.86.
Tomorrow is a big day as Apple will be announcing its new product, which could become a sell the news event, particularly with the political crosswinds coming from Washington and the President's State of the Union address. I would not be surprised to see more selling pressure this week, with a relief rally into early to mid February, that may ultimately complete a head and shoulders pattern on the S&P if a rally up to ~ 1120-1130 fails to break out to new highs and resumes a downward trajectory. This would be intermediate term bearish.
Those of you intent on taking on more risk - the short term traders / even gamblers so to speak! - may want to look at this tiny $3 stock: Quantum Corp (QTM). This is a data storage company, a really hot sector that's been blowing the numbers out of the water and should continue to be strong, that also appears to be breaking out above its 52-week high today. Could be ripe for a trade, but be careful as earnings are up this week.
Just some things to keep in mind... as choppiness and uncertainty have re-entered the market. Trade carefully and make sure you manage your risk by limiting your downside with stops and/or hedges!
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-------------------- ┼ ··∙ long live the shroomery ∙·· ┼ ...╬π╥ ╥π╬...
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