Newbie Do's & Don'ts

[Mariner*]

Averaging Down is a Losing Proposition
Friday January 20, 9:27 am ET
By TradingMarkets Research

Posted by maninfla
http://www.investorshub.com/boards/read_msg.asp?message_id=9347392

Many traders, especially those new to the markets, have a habit of "averaging in" to trades that aren't going their way. The following reasoning is used: If this trade was a good entry at my earlier price, then it must be an even better entry now! On top of that, the trader gets caught up in the idea of improving his "average entry price."
DaytradeTeam traders have seen this mistake all too often...

Unfortunately most traders learn the hard way that this logic simply does not hold up. This is a natural response that everyone has, which is exactly why it doesn't work in a market. The reasoning that "this trade was good then so at this price it must be even better" is based on the flawed assumption that the first entry price was a good one.


Pride tries to keep us from realizing that the very fact that the position is a loser right now is PROOF that the first entry was NOT a good entry (at least not yet). In fact, the stock or option has moved in the opposite direction the trader thought it was going to move, indicating that either the analysis/reasoning used to take the position in the first place was incorrect or at the very least the reasoning has been weakened by the market action since the position was established. This does NOT mean that the trade is no longer a good one just because you did not make your initial entry at the perfect moment (who does?) -- it just means that you probably shouldn't be willing to put more capital at risk now that it has started to prove you wrong.

The other part of the reasoning, that "this will improve my average entry" is simply a mathematical illusion.

By "averaging in", you don't just move your entry closer to the current price (the part Pride makes us focus on), you also double your losing position (the part we don't want to see). Instead of 1000 losing shares at 10.25 you now own 2000 losing shares at 10.00 -- BIG DEAL -- you are still down $500 because the stock price is still at $9.75 and now you own 1000 extra shares of a stock that is in a downtrend instead of the uptrend you predicted!

Don't get me wrong, it is not always a mistake to increase your position on a losing trade -- some circumstances (such as the stock sitting right at a very strong resistance or support level) warrant it. If you absolutely must add to a losing position, always do so with the conviction necessary to exit the ENTIRE position quickly should the trade move against you (through that critical support level you saw, etc.) from there.

On the flip side of the coin is the exact opposite reasoning and the exact opposite results over time. Adding to winning positions is a practice rarely done by even the most experienced traders, but one that can lead to increased profitability over time. This is exactly the strategy that our #1 ranked Day Trading System has used successfully since 2000. The next few times you hear pride telling you to "lock in your profits", double your position and set a stop at your new "average entry". After 5-10 of these trades you will be surprised at what a profitable (and a confidence building) method this can be.

Once again, traders who ignore pride and trade the opposite of emotion will reap extra profits and a much more pleasurable trading experience. DON'T MISUNDERSTAND ME -- you will not profit more every time you add to a winner and you won't lose every time you add to a loser -- I am talking about trading strategies to work OVER TIME -- anything can happen in the window of a few trades.


http://biz.yahoo.com/tm/060120/13812.html

[milt_p]

Newbie don't do my $15k mistake...


When I decided to get active in daytrading, I bought just about every membership and newsletter that promised "instant profits" or "guaranteed winners". I rushed out and bought SEVERAL expensive charting programs - two with real-time data feeds. And a whole bunch of expensive books that weren't worth the money.

Successful trading starts with 'homework' - lotsa homework and IT DOES NOT HAVE TO BE EXPENSIVE ! ! I found out- after wasting a lot of trading capital, that on IH - this board - there is a wealth of excellent education AND IT IS FREE ! Take time to learn from those who are winners.

Because I had a CMA and portfolio account with Merrill Lynch for twenty years, I thought I could start out making bunches of money by opening another trading account with an online discount broker. After wasting a lot of money on 'junk' hunches, rumors, hype, and other bad sources, I looked back at my first twenty days of "going for the gold". What I found was that I had lost almost $4,000.00 by making the mistakes that about 95% of "newbies" make.

Please pay attention to others who are sharing knowledge learned the hard and expensive way.

Please newbie, listen to this old man.

[QuickTrade]

Don't "Hold" after a pink sheet or a BB stock has just run up.
Enjoy your profits and dont look back.

I said dont look back!

[Mariner*]

Beware of the Pink Sheet Promotion: Provocative Statements and Investor Greed
Originally posted by:Capt_Nemo
http://www.investorshub.com/boards/read_msg.asp?message_id=6988439

Investors, especially small cap traders, are often lured into buying a company's stock in order to live up to the dream of making a quick buck, easily and without pain. To do this, one would have to bypass the higher exchanges such as the New York Stock Exchange, Nasdaq and American Stock Exchange in order to scout for companies to purchase on lower market trading venues like the Over the Counter Bulletin Board and the Pink Sheets where higher percentage returns on investment is the norm. These are public markets where regulatory requirements are practically invisible and disclosure through Securities and Exchange Commission filings is limited. Yet, an investor is still able to keep his mouth watering because of the potential of doubling or even tripling his investment in a matter of hours. Even though those risks would scare off any rational or conservative investor, the high reward is able to outweigh that risk, giving a strange comfort to the investor who is able to ignore those risks in exchange for a chance of a profit.

To reach a few of these investors, it does not take much for any company or management team to entice them to buy their stock. However, it does take a cunning, masterful and sometimes scheming promoter to capture many of these investors who are gullible to greed and desire to reap profits.

It all begins with a plan by the chief executive officer of the company, sometimes the only real or sole employee of the company, who goes out and hires consultants to help with his vision. The vision, at the surface, is an ambitious plan to create some sort of long term value through a legitimate operation. However, what meets the eye is not always true, and time and time again, a company's quest to create value is just an excuse to raise money through a scheme that is devised to stash as much money as possible, not for company operations, but for the management's piggy banks.

The promotion is underway when the consultants get to work with direct supervision of management, and this is where it gets interesting. Usually, the promotion starts off with a flurry of press releases filled with forward looking statements that have yet to be proven or backed with real results. Then if it is a real top notch promotion, a coordinated visibility campaign would occur with a well known investment newsletter that would successfully convert readers into buyers of the company's stock.

Take for instance, the June edition of the Kissinger Financial Letter, which is helping to create a bit of publicity for some undiscovered company. In this particular edition, the newsletter uses a seemingly very reputable source, an oil giant who has made billions in the Giddings Oil Fields of South Texas to help promote Am-Tex Oil & Gas (Pink Sheets: AMTX), a tiny oil and gas exploration company in which 25% of the project is jointly owned by the oil mogul's company. With his untarnished credibility, the newsletter leaves him as the backdrop for which they could now paint a picture of a sure thing investment. The newsletter provides even more incentives by claiming that if oil is produced at certain levels, the stock price of Am-Tex could appreciate thousands of percentage points.

While this may seem like a sure bet to snatch a pot of gold, this mind frame is what makes the average investor susceptible to risking their money in these types of investments. If you closely read the fine print, the editors of the publicly distributed report provided by Kissinger Financial Letter have received an editorial fee, as well as distribution costs of the newsletter by a third party. What is even more eye opening is that the newsletter was paid an astounding 100,000 shares of Am-Tex Oil & Gas by a third party.

When thinking logically, in a promotion with typical publicity stunts through major newsletters or otherwise, one should be able to see the red flags in a case like this. If the corporation has that much potential to produce a highly lucrative supply of oil, with the support of an oil giant, why would there need to be any reason to promote it? A good investor needs to ignore the hype and take off his rose colored glasses. Every investor must realize that money comes with responsibility, and if it is too good to be true, than it most likely is.

And that is this month’s real deal.
http://www.antandsons.com/therealdeal/pinksheetpromotion/

[RedneckInvestor]

Great board, gramps2...

I found the link on one of kgoodrich's seasonality boards, and look forward to learning and possibly contributing things I've learned elsewhere. I've only been investing for about three years, with only 6 months of penny stock experience.

Have a safe and happy 4th!

[renshen1]

Beware the "Gurus". Beware sites and chat rooms that charge you to hang out with them in cyberspace. Following others trades is frequently a losing game, especially in day trading. Your entries and exits will lag. Your stops will get hit. And number one most important thing is you are trading with a different set of emotions than the guy you are trying to follow. Beware the cheerleaders and hype masters. He may have a higher pain tolerance than you. Right there you are at a disadvantage if you follow him. Also... how do you know that the guy you are following really knows what he is doing? So ask yourself those questions before following anybody.

[cats]

Gramps, we've add this site to our 'Seasonal Penny Board' to help the newbies that visit.

http://www.investorshub.com/boards/board.asp?board_id=2367

[Mariner*]

Posted by Ruellit
http://www.investorshub.com/boards/read_msg.asp?message_id=4986211

one of the problems of a popular board is investors who are
scared to ask a question and just lurk might actually start
believing their is merit to a stock that continues to be posted
on a daily basis on a thread..

I'm glad you brought this up! First of all I want to say I have the highest regard for your opinion and your experience in the market as a trader. All should also know, that they sometimes need a lancebps to English translator, lol. With that out of the way my opinion is: Anyone can do all the DD or technical analysis they want, but neither move the stock price!
What moves the share price of any equity is market sentiment and I think whether people realize this or not they are here to express their opinions. When an equity is mentioned by several different posters it normally comes to the attention of all, lurkers included! If those opinions are positive it gives the reader the impression that the stock is expected to rise in share price. If that opinion is supported with documents, links, or other methods, it adds credibility! But when blanket statements are made like "To Da Moon", or "Don't miss this one" we all should have the response that this is a pump. Personally, I use this as a sign of caution, but I also do some quick DD (check for dilution and share structure) and TA (check the charts) on the equity to judge whether or not I'm too late to make a buck on it. Depending on overall market sentiment I look at percentage gain of the day for the stock in question, if it's already up by 30% I'll pass it over. This isn't my preferred method of trading, or it hasn't been lately!
One thing I've found to be a sign of a good trade is, if I'm in a hurry to buy it usually means I just gave some money away, but if I take my time and wait for a good entry, I win more often!

[Mariner*]

“CELLAR BOXING”
Written by Chart Stalker: #msg-2543926

There’s a form of the securities fraud known as naked short selling that is becoming very popular and lucrative to the market makers that practice it. It is known as “Cellar boxing” and it has to do with the fact that the NASD and the SEC had to arbitrarily set a minimum level at which a stock can trade. This level was set at $.0001 or one-one hundredth of a penny. This level is appropriately referred to as “the cellar”. This $.0001 level can be used as a "backstop" for all kinds of market maker and naked short selling manipulations.

“Cellar boxing” has been one of the security frauds du jour since 1999 when the market went to a “decimalization” basis. In the pre-decimalization days the minimum market spread for most stocks was set at 1/8th of a dollar and the market makers were guaranteed a healthy “spread”. Since decimalization came into effect, those one-eighth of a dollar spreads now are often only a penny as you can see in Microsoft’s quote throughout the day. Where did the unscrupulous MMs go to make up for all of this lost income? They headed "south" to the OTCBB and Pink Sheets where the protective effects from naked short selling like Rule 10-a, and NASD Rules 3350, 3360, and 3370 are nonexistent.

The unique aspect of needing an arbitrary “cellar” level is that the lowest possible incremental gain above this cellar level represents a 100% spread available to MMs making a market in these securities. When compared to the typical spread in Microsoft of perhaps four-tenths of 1%, this is pretty tempting territory. In fact, when the market is no bid to $.0001 offer there is theoretically an infinite spread.

In order to participate in “cellar boxing”, the MMs first need to pummel the price per share down to these levels. The lower they can force the share price, the larger are the percentage spreads to feed off of. This is easily done via garden variety naked short selling. In fact if the MM is large enough and has enough visibility of buy and sell orders as well as order flow, he can simultaneously be acting as the conduit for the sale of nonexistent shares through Canadian co-conspiring broker/dealers and their associates with his right hand at the same time that his left hand is naked short selling into every buy order that appears through its own proprietary accounts. The key here is to be a dominant enough of a MM to have visibility of these buy orders. This is referred to as "broker/dealer internalization" or naked short selling via "desking" which refers to the market makers trading desk. While the right hand is busy flooding the victim company's market with "counterfeit" shares that can be sold at any instant in time the left hand is nullifying any upward pressure in share price by neutralizing the demand for the securities. The net effect becomes no demonstrable demand for shares and a huge oversupply of shares which induces a downward spiral in share price.

In fact, until the "beefed up" version of Rule 3370 (Affirmative determination in writing of "borrowability" by settlement date) becomes effective, U.S. MMs have been "legally" processing naked short sale orders out of Canada and other offshore locations even though they and the clearing firms involved knew by history that these shares were in no way going to be delivered. The question that then begs to be asked is how "the system" can allow these obviously bogus sell orders to clear and settle. To find the answer to this one need look no further than to Addendum "C" to the Rules and Regulations of the NSCC subdivision of the DTCC. This gaping loophole allows the DTCC, which is basically the 11,000 b/ds and banks that we refer to as "Wall Street”, to borrow shares from those investors naive enough to hold these shares in "street name" at their brokerage firm. This amounts to about 95% of us. Theoretically, this “borrow” was designed to allow trades to clear and settle that involved LEGITIMATE 1 OR 2 DAY delays in delivery. This "borrow" is done unbeknownst to the investor that purchased the shares in question and amounts to probably the largest "conflict of interest" known to mankind. The question becomes would these investors knowingly loan, without compensation, their shares to those whose intent is to bankrupt their investment if they knew that the loan process was the key mechanism needed for the naked short sellers to effect their goal? Another question that arises is should the investor's b/d who just earned a commission and therefore owes its client a fiduciary duty of care, be acting as the intermediary in this loan process keeping in mind that this b/d is being paid the cash value of the shares being loaned as a means of collateralizing the loan, all unbeknownst to his client the purchaser.

An interesting phenomenon occurs at these "cellar" levels. Since NASD Rule 3370 allows MMs to legally naked short sell into markets characterized by a plethora of buy orders at a time when few sell orders are in existence, a MM can theoretically "legally" sit at the $.0001 level and sell nonexistent shares all day long because at no bid and $.0001 ask there is obviously a huge disparity between buy orders and sell orders. What tends to happen is that every time the share price tries to get off of the cellar floor and onto the first step of the stairway at $.0001 there is somebody there to step on the hands of the victim corporation's market.


Once a given micro cap corporation is “boxed in the cellar” it doesn’t have a whole lot of options to climb its way out of the cellar. One obvious option would be for it to reverse split its way out of the cellar but history has shown that these are counter-productive as the market capitalization typically gets hammered and the post split share price level starts heading back to its original pre-split level.

Another option would be to organize a sustained buying effort and muscle your way out of the cellar but typically there will, as if by magic, be a naked short sell order there to meet each and every buy order. Sometimes the shareholder base can muster up enough buying pressure to put the market at $.0001 bid and $.0002 offer for a limited amount of time. Later the market makers will typically pound the $.0001 bids with a blitzkrieg of selling to wipe out all of the bids and the market goes back to no bid and $.0001 offer. When the weak-kneed shareholders see this a few times they usually make up their mind to sell their shares the next time that a $.0001 bid appears and to get the heck out of Dodge. This phenomenon is referred to as “shaking the tree” for weak-kneed investors and it is very effective.

At times the market will go to $.0001 bid and $.0003 offer. This sets up a juicy 200% spread for the MMs and tends to dissuade any buyers from reaching up to the "lofty" level of $.0003. If a $.0002 bid should appear from a MM not "playing ball" with the unscrupulous MMs, it will be hit so quickly that Level 2 will never reveal the existence of the bid. The $.0001 bid at $.0003 offer market sets up a "stalemate" wherein market makers can leisurely enjoy the huge spreads while the victim company slowly dilutes itself to death by paying the monthly bills with "real" shares sold at incredibly low levels. Since all of these development-stage corporations have to pay their monthly bills, time becomes on the side of the naked short sellers.

At times it almost seems that the unscrupulous market makers are not actively trying to kill the victim corporation but instead want to milk the situation for as long of a period of time as possible and let the corporation die a slow death by dilution. The reality is that it is extremely easy to strip away 99% of a victim company’s share price or market cap and to keep the victim corporation “boxed“ in the cellar, but it really is difficult to kill a corporation especially after management and the shareholder base have figured out the game that is being played at their expense.

As the weeks and months go by the market makers make a fortune with these huge percentage spreads but the net aggregate naked short positions become astronomical from all of this activity. This leads to some apprehension amongst the co-conspiring MMs. The predicament they find themselves in is that they can’t even stop naked short selling into every buy order that appears because if they do the share price will gap and this will put tremendous pressures on net capital reserves for the MMs and margin maintenance requirements for the co-conspiring hedge funds and others operating out of the more than 13,000 naked short selling margin accounts set up in Canada. And of course covering the naked short position is out of the question since they can’t even stop the day-to-day naked short selling in the first place and you can't be covering at the same time you continue to naked short sell.

What typically happens in these situations is that the victim company has to massively dilute its share structure from the constant paying of the monthly burn rate with money received from the selling of “real” shares at artificially low levels. Then the goal of the naked short sellers is to point out to the investors, usually via paid “Internet bashers”, that with the, let’s say, 50 billion shares currently issued and outstanding, that this lousy company is not worth the $5 million market cap it is trading at, especially if it is just a shell company whose primary business plan was wiped out by the naked short sellers’ tortuous interference earlier on.

The truth of the matter is that the single biggest asset of these victim companies often becomes the astronomically large aggregate naked short position that has accumulated throughout the initial “bear raid” and also during the “cellar boxing” phase. The goal of the victim company now becomes to avoid the 3 main goals of the naked short sellers, namely: bankruptcy, a reverse split, or the forced signing of a death spiral convertible debenture out of desperation. As long as the victim company can continue to pay the monthly burn rate, then the game plan becomes to make some of the strategic moves that hundreds of victim companies have been forced into doing which includes name changes, CUSIP # changes, cancel/reissue procedures, dividend distributions, amending of by-laws and Articles of Corporation, etc. Nevada domiciled companies usually cancel all of their shares in the system, both real and fake, and force shareholders and their b/ds to PROVE the ownership of the old “real” shares before they get a new “real” share. Many also file their civil suits at this time also. This indirect forcing of hundreds of U.S. micro cap corporations to go through all of these extraneous hoops and hurdles as a means to survive, whether it be due to regulatory apathy or lack of resources, is probably one of the biggest black eyes the U.S. financial systems have ever sustained. In a perfect world it would be the regulators that periodically audit the “C” and “D” sub-accounts at the DTCC, the proprietary accounts of the MMs, clearing firms, and Canadian b/ds, and force the buy-in of counterfeit shares, many of which are hiding behind altered CUSIP #s, that are detected above the Rule 11830 guidelines for allowable “failed deliveries” of one half of 1% of the shares issued. U.S. micro cap corporations should not have to periodically “purge” their share structure of counterfeit electronic book entries but if the regulators will not do it then management has a fiduciary duty to do it.

A lot of management teams become overwhelmed with grief and guilt in regards to the huge increase in the number of shares issued and outstanding that have accumulated during their “watch”. The truth however is that as long as management made the proper corporate governance moves throughout this ordeal then a huge number of resultant shares issued and outstanding is unavoidable and often indicative of an astronomically high naked short position and is nothing to be ashamed of. These massive naked short positions need to be looked upon as huge assets that need to be developed. Hopefully the regulators will come to grips with the reality of naked short selling and tactics like "Cellar boxing" and quickly address this fraud that has decimated thousands of U.S. micro cap corporations and the tens of millions of U.S. investors therein.

[Mariner*]

Message Boards .
**Reposted by originunknown

There's no question that message boards can be a great resource. But they can be dangerous places, and investors have lost fortunes by trading on information they read on the boards. Securities regulators say they are troubled by the fact that so many investors seem to believe the message boards are full of hot "sure-thing" stock tips.

Message boards shouldn't be viewed as any different from a crowded room full of strangers. Trading on advice there is akin to trading on stock tips you receive from a stranger's conversation you overhear at a party. Still, people do it all the time. In fairness, message-board users have at times come up with quality "scoops" about companies -- catching wind of a merger before it happens, or learning that the company has secured a patent on a new technology. But often the information on the boards is pure speculation.

It's important to understand that just about everyone who posts messages has a motive, and it may be different from yours. When money is at stake -- as it is with any investment -- there's really no such thing as a completely objective discussion. People don't want to hear bad news about companies they invest in, and even the best-intentioned debates often end up in mudslinging. Likewise, it's important to remember that short sellers -- those who bet that the price of a stock will decline -- can profit by stirring up panic on a message board. People also can profit by stirring up excitement on the boards about stocks they own.

All these things point to the importance of not relying on information you read on the boards. "You should assume everything you read online is false until you can confirm it somewhere else," said John Stark, chief of the SEC's Office of Internet Enforcement. "People know not to believe everything they read, but think that somehow the Internet makes things more legitimate, and it certainly does not."

Here are some things to watch out for, and ignore, on the boards:

Blatant hyping, You're probably heading to the boards to find a thoughtful discussion on investments, but it's far more likely you'll find scores of messages from people cheerleading their favorite stocks. But that hyping can be dangerous, and contagious. When members of a message board get in the habit of explaining away bad news with statements like "I think things will get better soon," it's time for a reality check. Remember that a stock's performance has nothing to do with how much you -- or anyone else -- want the price to go up.

Claims of inside information. It's not uncommon to find users claiming to know the inner workings of companies -- when press releases are coming out, the status of development of new products, whether the company will meet earnings expectations. Some users even claim to know when particularly large purchases are about to be made in a stock. Such a purchase, if large enough, could push a stock's price higher. But, as with all claims of this sort, you should question the likelihood of anonymous message-board posters having such potentially lucrative inside information (and you should also wonder why, if they do have inside information, they're so eager to share it with so many strangers).

Stock promoters. Message boards have become favorite hangouts for stock promoters, individuals who are paid to hype a company's stock. Such people are often paid in stock rather than cash, meaning they make more money if they're able to get the stock price to rise. You should beware of message-board users who seem to repeat the company line a little too closely and know such things as when the next press release is expected. They may be on the company's payroll, in which case you should be skeptical of anything they have to say.

Stock promoters are required by law to disclose whether or not they're being paid, exactly how much, and the nature of the compensation -- even when they make postings on a message board. Still, the SEC has brought many cases against promoters who disguised the fact that they were paid, and it continues to track down offenders.

Bashers. Just as stock promoters and other hypesters profit by pumping a stock, bashers, or those critical of a company, can profit by getting a stock's price to fall. Message-board participants who are positive on a stock are always quick to suggest that anyone who bashes the stock must be a short seller -- someone betting the stock's price will fall. Most of the time, that's just plain wrong. But the SEC says it is becoming more and more concerned that some people on the boards who appear to be critical observers are actually slamming a company so that they can profit from a short sale. It's irresponsible to dismiss anyone with a negative comment as a short seller, but it would also be a mistake to think that anyone bashing a stock is just trying to save you from a bad investment. Do your own research.

Call in your certs! This is a strange one, but stranger still is how often you see this phrase pop up in message boards. "Certs" here refers to stock certificates, and the notion of "calling them in" means asking your broker to send you the actual paper certificates, rather than allowing the stock to be held for you in your brokerage account. The idea here is to prevent short selling in a stock. Short sellers make money by betting a stock's price will fall. Essentially, they borrow shares of stock in a company from a broker, paying a small fee for the service, and immediately sell those shares on the open market. Then, they hope, the company's stock falls in price, so that when it comes time for them to buy back shares to repay the ones they borrowed from their broker, they can buy them for significantly less than they sold the original shares for. The difference is their profit.

The reason message-board users try to organize a "call in your certs" campaign is that when the actual physical shares of a stock are in a client's possession, they can't be loaned to short sellers. Brokers who loan stock to short sellers are actually loaning out the shares that other customers keep in their accounts -- the same way a bank lends money that it is holding in other customer's savings accounts. In theory, if a group of investors could buy up the available stock in a company, and then get hold of the actual stock certificates, they could absolutely guarantee that there was no short selling because they would own every piece of stock, and there wouldn't be any available for brokers to lend to short sellers.

The flaws in such a plan are, hopefully, obvious. It's not uncommon for companies to have many millions of shares available for trading, and it would be virtually impossible for a group of investors on a message board to manage to control all those shares.

Oh, those market makers ... "The market makers don't want to let this baby run!" Market makers, or MMs, are the most evil people on the planet next to short sellers, according to message-board users. These are the professional traders who are responsible for organizing the buying and selling of stocks that trade on the Nasdaq Stock Market. They do this by posting a "bid" price at which they are willing to buy a stock, and an "ask" price at which they are willing to sell a stock. Nasdaq requires market makers to buy and sell at the bid and ask prices they post, and that helps to ensure that investors can buy and sell a stock if they need to. In the language of Wall Street, market makers are required to maintain an orderly market in the stocks they trade. One way market makers earn money is from the difference -- or spread -- between their bid and ask prices: If they are willing to buy for $10 and sell for $10.25, the 25-cent difference is their profit.

Many message-board users -- you'll find this most often on penny-stock boards -- believe that market makers conspire to keep the prices of some stocks down. Some go so far as to suggest that market makers themselves short stocks and then conspire to keep the price low so they can reap profits. Market makers do indeed short stocks. For instance, if an investor puts in an order to buy a stock and the market maker doesn't own any shares and can't find any other willing sellers, he or she will use a short sale to fill the buyer's order.

But the notion that market makers are involved in a plot to manipulate stocks in order to wring profits from their short-sale positions is a bit
far-fetched -- even for an industry that did face regulators' allegations of price fixing in the 1990s (market makers were accused of conspiring to bolster their profits by secretly agreeing to keep their spreads wide, and they ended up paying a huge settlement to resolve the matter). The idea that market makers would hold back the price of a stock that was in high demand is illogical. When faced with strong demand and lots of "buy" orders, surely the market marker could make much more money by buying shares, then selling them at higher and higher prices, than by trying to hold back a popular stock on which the market maker happens to be short. Indeed, market makers tend to avoid holding big positions in stocks, and they certainly don't try to get in the way of a moving market: At least when it comes to a stock that is listed on a major market, one market maker doesn't have enough money to stand in the way of all other investors in the market. There is a saying on Wall Street: "You can't fight the tape."

Price predictions. Message boards are full of predictions (many of them ridiculous) about where a stock's price will be in the near future. No one, including Wall Street analysts who do this for a living, can say with certainty where a stock is headed. Price predictions can quickly give way to hype -- if a dozen people on a message board seem certain a $5 stock is headed to $25, you may start to believe it. But wanting a stock to go up doesn't make it happen.

[Mariner*]

"Pinksheet stocks far to unregulated as there more likely to trick you printing toilet paper amounts of stock without any SEC warning"
**Written and Posted by: maninfla, in a response to another poster.

there was a time that that was true...that some solace could be taken in a so-called reporting company
but it is being proven to us every day that many reporting companies only use that as a veil for further [even enhanced] deceit

the biggest problem is the lag time ["grace" period] allowed between the actual event and the filing of such event [between 30-90 days]

eg: a company files its Q which appears to indicate a "manageable" number of shares [both AS and OS]
but in stealth fashion either a change in articles of inc takes place, and/or shares begin hitting the street [as we declare: "where is all this volume coming from?"]
but because of "loop holes", filings pop up well after-the-fact

these arent some wild made up "possible" scenarios...they happen every week

it has become increasingly apparent that the supposed "transparency" [and the basis for much of the subsequent TA on which it is based] simply doesnt exist

...so we just plod along, doing our best with guesstimates based on what is essentially company sponsored faulty info

pink sheets vs listed securities?
...6 of 1, 1/2 dozen of the other
----------------------

be aware:
no other one individual has had more widespread overall negative impact on general SH value and continuing abuses than FAZ [frances a zubrowski] and his company AWI [alexander wade inc]
[based on his involvement on dozens of stocks]

pray for peace

[TheMarketVuShow Live]

Before you do 1 trade read this:
It is long but worth it.
What is your business plan?
What is you business? Stocks, Emini’s or both. What will be your time frame? Scalper, Swing trader or Long term (How can you chose if you do not know how to read the market environment). What are your hours of operation? Part time or Full time. (How can you expect the same type of results as a full timer if you are trading part time). Who are your competitors? (Other traders). What are the successful ones doing. Remember if supposedly only 10% of the people make money in trading why would you want to do the same thing the other 90% are doing. What technology are they using and what will you be using (Please refer to the previous sentence). What technology and methodology actually works. What inventory will you have? A traders inventory is cash and must be protected at all times.
If you want to win you will need to put time in to learn the cardinal rule of trading: Run your trading like a business. Unless you adopt a business like approach to trading, profitability will be difficult.
READ Jesse Livermore:Worlds greatest Stock Trader,John Patrick - Money Management, Watch the movie ROUNDERS...
Devolope your trading methodology
•on your mark – Preparing to trade your methodology
•get set – Zeroing in on your price target at which to trade
•go – Executing your trade
Simulate with real time data using point and click execution
Go live tading 200 shares or 1 futures contract
Know the market enviorment:
You can't get more out of a market than is there. If you're going to be flat because the market is going sideways, there's nothing to do for a period of time. So that’s what you do. Nothing. If you trade correctly you will make fantastic profits when the greatest targets of opportunity are present.
Market is Always Right:
One nugget of advice that I believe is valuable to anyone trading the market is: Don't worry about what the markets are going to do, worry about what you are going to do in response to the markets.
Do research; learn; make a plan: work the plan; take responsibility for your own decisions and actions.. Don't make excuses. Learn from your mistakes.
Losses
Face it: You are going to have losses when you trade. If you don't have losses, you are not taking risk. If you don’t risk, you won’t win. Losses aren’t the problem. They are part of the game. Most likely the best you will hit is 7 correct trades out of 10. It’s how you deal with 3 losses that is crucial.


This article is from 4/19 Briefing.com
Inv. 201: #7: Trading And Investing Are Different

[BRIEFING.COM - Robert V. Green] Many Briefing.com readers employ both trading philosophies and investing philosophies. Both are valid approaches to the market. But when you confuse the two approaches at the same time, you are just asking for trouble. Here are some basic definitions.

Trading Defined
A trade, by definition, is a short term approach to making a profit.

Most trading profits are derived from volatility in a stock price. Stock prices fluctuate whenever the market is trying to determine the proper price for a stock.

But there is no such thing as the proper price. If there were, stock prices would stabilize very closely around whatever that price was. Who would sell for less? Who pay more?

True trading strategies involve exploiting short-term gaps in the market's attempt to properly value a stock.

How to determine these gaps, however, is a whole field of study by itself.

Trading Strategies
Almost any rationale can be used for trading, particularly very short term trades. Many trade on the basis of momentum, which is simply the premise that any stock currently going up is more likely to continue going up, than it is to fall. Momentum based trading has never been more popular than in the advent of the new information investing era of the last five years. In fact, many people blame the bubble on momentum investing's rise to prominence.

Technical analysis is another very useful approach for trading. In the lack of other news events, technical analysis of a price/volume chart can provide clues as to the latent buying or selling pressure still in the market, but not yet implemented. Proper reading of the chart can help determine the level of that demand - and exploit it.

But it is wrong to assume that everyone comes to the same conclusion when reading a TA chart. There is no single interpretation to any chart. Often new investors learn a single TA approach, and begin believing that, because a pattern fits the one described in their TA book, the predicted outcome is inevitable. It just doesn't always happen that way.

Trading And Analyzing Fundamentals
Trading does not mean that analysis of fundamentals is ignored.

In fact, many successful traders exploit the market's attempt to properly value a stock by arguing that the current valuation on the stock is not "in-line" with the trends shown in the company's fundamentals. A trading argument can be made that, eventually, the market will more properly value the fundamentals. Capturing this "gap in valuation is a basic trading strategy, that may or may not be short-term.

Of course, there are many extremely successful traders who do not deeply analyze the underlying business behind the stock. Their techniques are based on shorter term fluctuations in the market's pricing.

Daytrading Defined
Daytrading, as term to describing an investment approach, has always been used poorly by the media.

In most stories, "daytrading" is meant to imply mindless or reckless investing. Nothing could be further from the truth. Most of the major capital behind "daytrading" is driven by large institutions.

As an example of this fact, consider that program trading is consistently around 40% of the NYSE transactions every day. Most of these programmed trades are all based on a basic principle: using a computer to "measure" a gap in pricing of some kind, either between two linked instruments (arbitrage) or between a perceived "proper" metric and the "measured" metric. Whenever the computer program metrics being measured reach a point where the value to be captured exceeds a certain level, the trades are automatically placed.

There is, unfortunately, no widely agreed upon definition of daytrading that we could argue is the "right" definition.

Many people attempt to use the single word "daytrading" to capture two very different styles of trading. By definition, a person doing "daytrading" should be closing positions by the end of the day. Otherwise, it isn't daytrading. Selling a stock three days after you buy it is trading, not daytrading.

In addition, daytraders at "daytrading firms" with direct access to Nasdaq II pricing systems and ECNS is very different than daytrading over the internet at an online broker.

Daytrading with direct ECN access allows for traders to bypass market makers. There is no such thing as daytrading NYSE stocks when this definition is used. At daytrading firms that provide this capability with Nasdaq II access usually require that all positions be closed each evening and require a minimum of $50,000 or higher to even open an account.

Daytrading at an online brokerage, where a single position is taken in the morning, and closed later in the day, is a completely different style of investing.

Regrettably, most of the mass media doesn't make this distinction, yet it is extremely important. Strategy at a daytrading firm usually involves making many very small profitable trades. Strategy for trading a single position is usually just to pick up a few days during the day.

Investing Defined
Investing is ownership of the underlying business behind a stock. The expectation is that when the business grows, the stock price will rise as the market prices the "better" business atf a higher level.

Fundamental analysis is used to determine the health of the underlying business. Comparative analysis is used to determine the value of the stock, relative to others in its industry. An understanding of technology is helpful for technology stocks. Some of the best investments are made on the cusp of change in technology, before the fundamentals of the company have actually shown the impact of the change.

Investing on a fundamental premise is almost always, by definition, a long term investment. It often takes years for a business to fulfill its business "vision."

In order to have an investment premise successfully "pay off," the following has to occur:

An articulated premise is formed describing "why" the business will grow earnings eventually
A reasoned "projection" of how the market will value those "eventual" earnings is developed
A target price for the eventual fulfillment of the investment premise can then be developed (which calculates your reward potential)
An analysis of what can go wrong in the business is developed.
A judgment of how the market would value the company, if those "wrong" events occur is made. (This calculates your "risk" potential.
At this point, an assessment is made of the risk/reward potential. Some great companies are simply titled too far to the risk side of the ratio to argue for an investment.)
A list of metrics is developed that can be followed in every quarterly earnings report, to judge whether a stock is: a) headed towards fulfilling its business vision; b) headed the wrong direction; or c) has fulfilled the vision you initially articulated.
With actual metrics defined, an investment premise can be judged fairly easily whenever new fundamental data is available (earnings reports or SEC filings or guidance revisions).

However, patience is required for an investment premise - and can sometimes be sorely tested.

Frankly, as an investor, if you can't withstand a 35% paper loss in your position, you probably should not be holding growth stocks at all, particularly technology stocks. (You should probably own mutual funds.) There are often large swings as the market tries to "properly" price growth stocks.

Getting the Two Styles Confused
Briefing.com does not favor one style over the other. Both have their place, and both are valid approaches.

However, it is important not to get the two styles confused, especially with respect to a single position.

All too common is the person who takes a position for a short term trade (I'll sell when I get 5 points out of it!) and then winds up holding the stock for six months, just waiting to break even. When you enter for trading reasons, and then hold for investment reasons, you are actually exposing yourself to the downside of both approaches.

Another example of confusing the issues is when a stock rises a lot on particular news. Do you back off from jumping in, because yesterday it was $5 cheaper? It may, in fact, be "cheaper" at the higher price, if a significant risk has just been removed by the news.

How you view such an event is largely dependent on whether you have a trading premise or an investing premise.

Know Yourself - But Know Your Positions More
Most people tend to think of themselves as either primarily a trader or an investor. But, there is nothing that states you have to be "one or the other" for all of your positions.
It is, however, important to remember which hat you have on at any given time.

[ground_fog]

My biggest problem has been always thinking that I have to trade or make something happen. Sometimes its better just to sit and watch then jump in on a down day.

[billy_at_the_beach]

maybe they were only responsible for themselves... I used this trading account for the first 5 months of this year as my only source of income because I was laid-off along with most of the rest of the office due to a buyout... it really sucked getting out early on POS's I was stuck in but sometimes you do what ya gotta do to get by... other than that, I totally agree with your statment fwiw, lol

[renshen1]

use copy and paste from your address bar.

[MoneyWpennies]

how do I post a link, need to post a link before i get my ass chewed out, TIA

[BullNBear52]

Think you sold too early? Think again....

It bothers you when price goes up because you feel like you missed an opportunity to make more, therefore your taking good trades and converting them into negative ones by thinking that way.

Thanks to: http://www.investorshub.com/boards/profile.asp?user=30299

[BullNBear52]

Newbies beware the foxes.

Posted by: gotmilk
In reply to: kgoodrich who wrote msg# 3526 Date:6/10/2004 11:08:29 PM
Post #of 3546

The Master Cat or, Puss in Boots in Sub to .02 Land

... the iHub cat gallantly pulled on the boots
and slung the bag about his neck.

Holding its drawstrings in his forepaws, he went to a place
where there was a great abundance of rabbits.

He put some bran and greens into his bag,
then stretched himself out as if he were dead.

He thus waited for some young rabbits,
not yet acquainted with the deceits of the world,
to come and look into his bag.

He had scarcely lain down before he had what he wanted.

A rash and foolish young rabbit jumped into his bag,
and the master cat, immediately closed the strings,
then took and killed him without pity.

Moral:
There is great advantage in receiving a large inheritance,
but with diligence, ingenuity, and many bouts of constipation,
one playing the Pink Sheets can obtain the wealth of others,
as the world has many more rabbits than foxes and cats.

http://www.investorshub.com/boards/read_msg.asp?message_id=3309159

[gramps2]

Evening,

OT:

Bless them all...

Thank you for your service.

gramps

[cbfromli]

one mistake I made as a newbie...

I think newbies try to make a killing on every trade...I know I thought that in the begining...held for more profit instead of taking what I already have....I have stopped, now I take profits...another one was buying blind...if someone posted that they bought xxx stock at $$ I thought if he thinks its good then it must be....not any more for me...I rather wait and see the action before jumping in....still have lots and lots to learn but slowly I will...markets will be here tomorrow to make some profits...
Carlos

[bbgold]

Stop Loss orders are a Must
Especially for a beginning trader. Don't worry about whether your stop will be hit but rather use them as they are intended, to stop a loss. When determining where to establish a stop limit you want to look at a prior support area for a stock and set your stop just below it. If the price continues to hold support at that level and uptrend then your stop will not be hit. You want to stick to using them as they are intended to "stop the loss" at a level you are comfortable with rather than having a small loss turn into a large loss. Especially for a beginning trader it is important to limit the $ lost with every trade. If trading an otcbb stock then set some type of mental stop limit for where you will exit the trade. It is better to be Safe and take the stop with a small loss. You can never be sure when a short term downtrend will turn into a long term downtrend. If the price is going Up then your stop should not hit.
I hope this helps. Sincerely, Bob :^)

[excel]

Yes Sir! Found out the hard way.................

http://www.investorshub.com/boards/read_msg.asp?message_id=2878839

[otraque]

that's a good one:)

[otraque]

i think the biggest cause of destruction in Newbies is when they take up a hostile attitude to shorters of their stocks.
Find the shorters that talk sense, they just may be right and save you from a huge loss.
I would say the vast majority of newbies that got wiped out in the Bubble were those that thought shorts were the forces of darkness.
This is the the most destructive bigotry a newbie can develop.

[otraque]

Don't make the mistake thinking the successful pros are arrogant gunslingers with huge cajones.
The best all have one thing in common:HUMILITY.
They have systems, take care, and hedge, when neccessary---and they AVOID emotion.
Newbiers don't ever use Margin unless you fully understand it and remember that it is by and large a destroyer that has many bodies in its wake.
And rule NUMERO UNO
Maximize Profits and Minimize Losses.

[Capitalist]

or in other words,

Bulls make money. Bears make money. Pigs and sheep go broke.

[renshen1]

Newbies... If you are too afraid, you will lose. If you are too gready, you will lose...

[Rager]

Newbies and the NEWS...,
Too often you will see great news on a stock with
lots of volume, only it is going down?
The news is a tricky play to say the least,
not to say there are some good $$$ to be made.
just be cautious, look at the charts,
Has the stock been running up prior to the
news realease?
I have made good plays by watching stocks
3 or 4 days after a PR, mostly pass on the
trade if you are not sure.
jmho

ps
ihub news board

http://www.investorshub.com/boards/board.asp?board_id=1508

[gramps2]

'STOP LOSS TRADES' (it's not knowing how, it's knowing when)

"Use them at your own 'PERIL'".

Morning,

If you place a 'stop loss' trade and then go off to work with piece of mind, you're just giving the MM's more 'AMMO' to play with a position.

It allows them to fill gaps easily with you're $$, they also pick up a ton of cheap shares on the way by! They can use them as steping stones to take the bid/ask to wherever they like without getting their 'toes wet'!

If you use a stop loss as a 'babysitter' in the AM, be prepared to be po'd in the PM! Don't blame the MM's for reaching down and taking your shares then let the position run to the next level.

"who gave them the AMMO?"

gramps

[originunknown]

Many consider day trading as gambling, mostly because they don't know people who trade with a Plan, nor do they realize the knowledge required to increase the number of better trades incrementally.

[bbgold]

Trading, Investing, Gambling?
Are you really sure which you are doing? Do you find yourself averaging down on a trade that you are uncertain about? Do you hold a losing position hoping that it will come back? Do you buy something Hoping you are right? Are you betting on a losing hand? When you have a Winning trade do you cash it in or hold out for More? Who is controlling your decision making, Mr. Greed or Mr. Fear? Trading/Investing/ Gambling you need to look inside yourself and decide Why you are reacting the way you do. With the Markets you can be doing one or all three and not really recognize it. Psychology is a Big part of the Markets and you need to constantly look at yourself and your trades and decide 'Why am I doing this?". Are you Trading and looking for the Good trades that will make you money and you capture those gains? Are you Investing and looking for the Good investments that are Appreciating? Are you Gambling and looking for something that will be the long shot or the odds are against you? Are you holding only the Winning trades? A Big part of the Markets is recognizing How you are trading and if you are making the Right decisions. Always remember that you want to be on the Winning side of a trade and not Hold and Hope that it will work out. Reviewing your trades or investments and deciding whether to Hold or Fold might give you some insights into How you are treating your participation in the Markets. Don't be a Gambler!
Sincerely, Bob :^)

[mochi25]

SAtorino is SO RIGHT when he writes-the time to buy and sell is when you hate to do it-this is because we are all human and will follow others when it comes to something scary like investing our hard earned money-thus, when we feel it's ok to enter a buy because it looks like the stock has gone up enough to confirm our belief it is a good buy is exactly the time when those who bought earlier are going to unload their shares which will cause the stock to drop and you will hold on believing you couldn't be wrong after all that deliberation-so you hold on and hold on then when you think you've lost too much you will sell-know that human nature runs contrary to making money in the stock market!

[renshen1]

Newbie Do read this article:

TraderMike: The Basics of Trading Part I
Psychological Aspects of Trading

I have recently been reading a study by Terrance Odean, an assistant professor at the University of California.

Odean received the trading history of over 60,000 accounts that where active been 1991 and 1996 from a discount broker and used the data to study the trading behaviors of online investors. Not surprisingly, most of them under performed the stock market and only a small minority beat the market. In fact only half of active traders managed to just break even. Most simply made little or lost a little. Only a small minority produced outstanding returns(the top 5% had an average return over 2.41% a month and only 1% had a return over 4.86% a month. Professional investors do not fare all that much better as half of all mutual funds fail to beat the S&P 500 index every year.

The failure rate of investors and traders is a different picture than that which is portrayed by online and traditional brokers through their advertisements. In fact if most people actually lose money in the stock market, then the market is more like a pyramid scheme in which wealth is simply transferred from the mass and given to the brokers, stock manipulators, market makers, and a small super trading elite at the top than the get rich fantasy that is so often presented. A view that some might find romantic would picture it as a pure Darwinian survival of the fittest and leave out the part about the manipulators. One would need more data to confirm if either of these views are true. A study on how many trading accounts are opened and closed would prove or disprove this. If brokers must continually recruit new accounts to replace ones closed due to losses than these two pictures of the market are correct. Money earned outside of the market is brought into it and given to professionals and manipulators. Just like a ponzi scheme, more money has to be recruited to keep the engine running. For a pyramid to continue new blocks must be placed on it. No matter how the market is structured, what is more interesting is trying to figure out why it is that many people lose money and a few make a lot of money in the stock market. What can we learn from that to increase our own returns?

How do most people lose money? Odean’s trading data shows that almost all individual investors generate poor returns by selling winning stocks too soon and holding on to losers. He argues that they do this because they are "overconfident." They consistently believe that their losers will come back and the market ends up proving them wrong. When they have a winner they sell them too soon, fearing that it will become another loser.

Odean’s study provides a great resource about the behaviors of active investors. However, any conclusions about motivations that can be drawn from the data are merely theoretical and cannot be proven. This isn’t his fault, its simply the nature of proof and evidence. There is no way one can extrapolate the motivations of thousands of individuals by studying number data and one doesn’t have the resources to ask all of these people about their motivations. One can only manufacture logical explanations from the data.

This isn’t a bad thing. You can learn a lot by thinking in that manner. My guess is that people do not lose money in the markets because they are stupid or because they aren’t pros. Remember that most mutual funds also underperform the stock market. I believe the primary difference between winners and losers is psychological. Winners and losers are presented with the same set of information, however the winners take different actions. What guides their actions? From my own history of losing and then making a lot of money in the stock market and study of general and trading psychology I’ll try to come up with some explanations. I believe that the actions of losing traders are guided by fantasy and a fear of losing while winning traders are guided by confidence. Without the proper mindset and attitude you cannot make money in the stock market. It’s not a guarantee to being successful, but it’s a prerequisite. However, the stock market is an environment that makes it difficult for most people to obtain this proper mindset, let alone maintain it.

environment -> senses -> beliefs -> identification -> motivation -> actions

The human mind gathers information about the outside world through the uses of it’s senses. It recognizes the information and then processes it. It then identifies it and responds to it with a whole host of beliefs, unconscious and subconscious. Based upon a person’s motivations and interpretations of what is taking place he carries out an action. The key is that actions that people take are based upon their own set of associations with what is going on in the world outside of them. These associations are based upon past experiences and a person’s beliefs about himself and the task at hand. The world consists of inputs that make people feel and they respond.

To relate this to trading, winning traders and losing traders experience the trading environment differently. It makes them feel different and as a result their actions consistently vary. In pyschological terms, they interpret the market differently because they have a separate belief system in the way that they see themselves relative to the stock market.

Let’s list these beliefs and actions below:

Belief statements that different traders can make:

Winning Traders

The markets provide an opportunity

The markets exist to give me profits

If I get stopped out then I have to reevaluate the trade

If the market doesn’t do what I expect then I must reconsider

I’ll take one trade at a time.

I don’t have to be perfect, I just have to do my best.

Money is not that important

Losing is part of the process of making money

Trading is a game, I know I can win

Every setback provides me with new market information

I can wait for an opportunity to come



Losing Traders

I must be in the market now

If I lose on this trade I am a loser

If I wait for my trading rules I’ll miss out

If I get stopped out I have bad luck

I can’t lose money

The market makers got me again

I’m an idiot, how could I lose money

What will they think when I tell them I lost money on this one?

The stock market is rigged

It’s impossible to get a good fill

I cannot take a loss

If I take my profit then I am right

These different beliefs create different characteristics of winning and losing traders:

Winners:

Get pleasure from trading the market as an end in itself

Not motivated primarily by money

Confident that they can make money in the market

Not afraid to take a loss

Patient - waits for opportunities

Uses a highly planned strategy

Is well prepared, done his homework

Measures the risk/reward ratio of every trade



Losing Traders:

Never define a loss

Locked into a narrow belief system

Hesitate to make a trade

Do not stick to a system

Trade by whim

Trade by emotion

Have no consistent strategy

Do not practice risk management

more interested in proving themselves right then being a success



Financial markets are structured in such a way that make it very difficult for someone to approach them with a confident psyche; and that is why it is so difficult for most people to make money trading them. Almost all environments - the workplace, family, friends - provide external forces that limit a person’s behavior. They provide a set of rules of what is right and wrong and what actions are to be rewarded or punished. This is not true for the stock market.

The stock market does not care if you make or lose money. The market has no control over you. Since the market does not exert any external control over your actions you have to fashion your own system of rules and have the discipline to obey them in order to be successful. No one else will do it for you. You have to have the confidence to take this responsibility yourself. It takes enormous self control and discipline.

Most people cannot take this approach. Instead they construct a fantasy in which the market provides them with future riches. They transplant these fantasies on to the individual stocks that they purchase and have difficulty confronting the reality of being wrong. When events don’t match their illusions they simply ignore them. If a stock they bought drops below their purchase price they refuse to reject the fantasy that their decision to purchase the stock will make them money and instead convince themselves that it is a winner that merely isn’t in favor yet.

However, stocks do not make successful traders money. They do it themselves. Instead of believing in the power of stocks, they believe in the viability of their own trading strategy. They have faith that their own disciplined interaction with the stock market will make them money and not the other way around. The decision making freedom the stock market gives ruins most active investors, but handsomely rewards the few prudent traders.

As I said earlier it takes extreme confidence to execute a well planned trading strategy and most people cannot find it. Instead, they often experience intense anxiety in the market. They may come to believe that the markets are rigged against them. The market doesn’t cause this. It’s their lack of strategy that twists them into emotional knots.

What one has to do to move from a fear stricken psyche to one capable of building enough confidence to make money in the market is to first believe in oneself and develop a strategy that consists of strict money management techniques. I’ll discuss how I have done this later. But, once you have a strategy in place you have to have the fortitude to continue to believe in it when you suffer losing trades. Losses are a part of the game. The way to make money is to accept them and to use money management techniques to keep your winners larger than your losers.

You have to move away from a mindset that stocks will make you rich and believe that your trading method will make you money. Then you must come to realize and hold the belief that being right or wrong on each individual trade does not matter. You have to be able to move through the adversity of losing trades and hold the faith that you will make money in the long run. This is why people find it so difficult. People focus too much on the individual trades and hold unrealistic fantasies about them, while they cannot take responsibility for the decisions that go wrong. The worst ones take it personally. Most never understand what is required to succeed.

The bad news in all of this is that if you are trying to generate large percentage returns on your account the odds are stacked against you. The odds of someone starting small and making a lot of money in the stock market are probably the equivalent of a rookie league baseball player making it into the big leagues. The good news is that most people trade recklessly, on pure emotions, and with little or no strategy so the competition isn’t so hot. Dedication and following a sound strategy can go a long way. I try to demonstrate that and encourage you in that direction with this newsletter and website.



To read the Odean studies yourself click this link:

http://www.gsm.ucdavis.edu/~odean/papers/returns/returns.html

[originunknown]

Five common trading mistakes:

1)Trading without a Plan
2)Losing your discipline and patience
3)Trading without stops
4)Hanging on to a losing position and turning a winner into a loser
5)Too much risk without enough capital

[originunknown]

Six keys to success in trading:

1)Correct mindset
2)Commitment
3)Proper capitalization
4)Position sizing
5)Money management
6)Responsibility for your own trading

[satorino]

Good advice: look at any stock you are interested in, in terms of the 144 days moving average. It is a magic number. if a stock is below that, it is inherently weak. Above it, inherently strong. Price declines usually bounce off that sma, and run ups bounce off it to go back down.
Sat.

[Capitalist]

A Newbie DON'T

DON'T give in to fear and greed. This is what the professional traders and market makers will use against you!

One of the boards on iHub (AIM Users) actually has the slogan "Buy from the scared, sell to the greedy!" Think about this. Are they buying from you when you panic and selling to you when you have dreams of mansions rolling around in your head?

The way to defeat FEAR is to trade smaller. If you're nervous about a position bring it down to the "sleeping point". Smaller positions have the advantage that you can set wider stops and avoid the intraday shakeouts by which the MMs will use your fear to buy your shares from you at bargain prices.

The way to defeat GREED is to TAKE SOME MONEY OFF THE TABLE when you have profits. That stock you bought that is up 200% can just as easily go back to where it started. And it only has to lose 67% to do it! ($1.00 plus 200% is $3.00. $3.00 minus 67% is $1.00. Go figure.) The majority of the big selling that allows large traders to take their profits occurs when they are selling into a huge blowoff spike in a stock. This is how they move large volume. And who's letting them do it? The greedy newbie who doesn't realize he/she is about to become the mother of all bagholders...

[gramps2]

'Newbie' Don'ts.....

A few tip's that might save a 'newbie' from commiting,....'NEWBICIDE'!!!!!!

1) Don't buy at the open.....chill

2) Don't forget to take your money of the table asap & ride the 'freezzies'.

3) Don't go against the trend. (unless you have deep pockets,no holes) The trend is your friend!

4) Don't trust. Verify!

5) Don't use Mortgage or Rent money!!!

6) Don't chase a stock!!

There are many others......but it's time for my nap.

gramps...ps...was up late last night!

[gramps2]

A 'newbie' Do!......(my Wife reminded me about this one)

'newbies'...."SEND THIS TO YOUR PRINTER!!!"

A repost.

Years ago after a string of stupid/bad trades I came up with this idea.

'POSTERS'!........don't laugh!!!!!!

It's very easy to get caught up in the moment......you're watching multiple positions, some up, others down. You're constantly checking for news. You're hungry. One of your 'flippers' looks like it's about to run.....one of your longs just released financials, you don't have time to read them because you've got 3 e-mails/PM's you haven't responded to yet!.......&.......'ya gotta go to the 'potty'.....You say to yourself "what should I do next?"..... (Sound Familiar?)....I'll take a SWAG (scientific wild ass guess)..... "you went to the potty"!

During 'moments in time' like this it's very easy to lose your discipline!!!

When this happens you make 'DUMB desicions' that turn into BAD/stupid trades!

To combat this 'temporary syndrome', make yourself a few 'posters', one word or one line 'bullets'!!....put these literary 'epics' on the wall over and around your 'monitor', the door to your office, inside the 'frig'.........even the 'POTTY'!!!

Heres a few of my 'oldie but goodie' dope slap posters:

"CHILL"......."LEVERAGE is KEY"........"DON'T FALL IN LOVE"......."Take FIVE & DFRAG"........"TAKE YOUR TIME!"......."NOTHING WRONG WITH GOING TO CASH"........"HAVE YOU TAKEN YOUR $$ OFF THE TABLE YET?"......

You get the idea.

I made my 1st poster in Kindergarten.....brought it home and showed 'Ma'.....she gave me a 'hug'....then she nailed it to the 'ice box'!

Take care.

gramps

http://www.investorshub.com/boards/read_msg.asp?message_id=2595536

[gramps2]

This is a 'newbie' don't.....(blast from the past)

"Had to get out of XYZ stock because I had to pay my rent, what is a good re-entry point?"

Very sad.

That is a paraphrasing of a public post that was directed towards one of the i-hub Guru's this week. I don't think the post received a reply for obvious reasons.

Have to get this off my chest.

You shouldn't be using monies for investing/gambling that you'll be needing for household expenses! It's crazy.

If you are your only responsibility that's one thing, but if you have other souls looking to you for food, shelter and education, playing the market with 'rent money' is 'NUTS'!

Just don't.

gramps

http://www.investorshub.com/boards/read_msg.asp?message_id=2538822

[bbgold]

Interesting Gramps
I think I understand your point about leverage, still not quite sure though. It has to do with limiting your risk in a stock that has become overpriced by selling and buying more shares of a lower priced stock? Better not tell that to Berkshire Hathaway holders. I agree with taking profits off of the table after a stock has moved up. I like the idea of having 'free' shares, ones where you have sold enough to get your money back, perhaps a Profit also, and still some shares leftover to hold longer term. I am not sure I completely understand the 'leverage' part. I never did do very good at trading pennystocks though so perhaps you are onto something. I always seemed to sell the stocks I thought were overpriced and buy a million shares of something that was really low. The funny thing was that a lot of the time there was a reason for the prior stock price going up, and it continued to do so, whereas there was a reason the cheaper stock price was so low, and it usually stayed that way. I always seemed to sell the uptrending stocks too early and put the money into something else cheaper that ended up worthless. I think I would rather have a few shares that are going up than speculating on a Lot of shares that I am unsure of? Guess it might be a personal decision whether to keep looking for something cheaper or holding something of value? Definitely take profits and keep an eye out for the Next good mover, where the price is going Up.
Enjoy the Evening Gramps! :^)

[gramps2]

Evening 'gold',

http://www.investorshub.com/boards/read_msg.asp?message_id=2646985

If you're gonna play the pennies....

You 'MUST' consider the following!

Subject: 'Leverage' aka 'Money Management'

You must use percentage/leverage, if you do, it becomes your friend.

Let's say you bought 'XYZ' @ .02 and for whatever the reason, you're still holding all your initial and subsequent buys. You come home from work one day and find it closed @ .075.... that's over 300%.... "I think you're starting to fall in love?" if you don't sell some now! Don't get caught holding a bag because you read some faceless and nameless post that said 'It's going to .12".

The thing has already given you over 300%.... in order for it to give you 1 more 100% it must "DOUBLE!!!".... 'hello!'

You're overdue. Sell some of your little boy/girl friend and go to cash and start looking for another 'Lolla Lovely' or "Mr. Wonderful'.

The attributes your new love interest should have should be the following:

1) The PPS should be at least 200% lower than the PPS of the stock you sold.

2) It should meet the same criteria that made you buy 'XYZ'.

3) If you don't find it today......"THERE'S NO RUSH".......'that's why God made tomorrow!'

The more shares you have the more 'bang for the buck'.

"LEVERAGE is KEY"!!!!!

Take care.

gramps

[bbgold]

I don't get it?
Kind of like a punishment if they try to leverage a position? Or like writing "I will Never average down" enough times so that it will sink in, maybe to fill an entire notepad? I will try to get into the similarities between gambling and trading in another post.
Keep Rocking Gramps, not Leveraging? :^)

[Train Guy]

A newbie do: Learn and do some math.

As someone new to the stock trading game, you have lots of questions. One way to get answers to questions is with math. And it doesn't have to be hard or complicated math. Let's say you have an IRA with $20,000. You are going to retire in 20 years and you would like to have $1 million. Is that realistically possible without hitting the big one? How much money are you going to need to contribute? What kind of returns are you going to need to get? All very valid questions that if you aren't going to be just be wandering aimlessly without a plan, you need to answer. Get your calculator out.

Believe it or not you don't need to contribute any more money to the IRA. Yeah, but I would have to hit the big one then right. Nope. Do the math. What kind of yearly return do you need to turn $20,000 into $1 million after 20 years? A whole bunch a bunch right? Nope. It's higher than the average return, but let's make it easier. Divide by 50 to find out what kind of weekly return you need. That looks much easier doesn't it. Say you're trading a $20 stock. How much do you have to make a week after commissions? A couple dollars a share?? Several quarters? Nope. Get your calculator and do the math. Answer below.














One dime. What??? How can that be. Did you do the math? Starting with $20,000 and making .5% a week for 20 years is over $1 million. A $20 stock at .5% a week is .10 after commissions. If you can't consistently trade slow boring stocks for .5% a week, trading is probably not for you. In that case, just put your money in an index fund and forget about it. But if you're willing to learn and do a little math. And willing to learn about the stock markets. Then over the next 20 years, make yourself $1 million.

[gramps2]

'newbie' homework!

Tonight I want you to write 500 times the following.

"LEVERAGE is KEY"!!

gramps...ps

Use both sides of the paper, there'll be 'NO' wasting paper at I-HUB-U

[bbgold]

The Darvas Method #board-1362
Some light reading on the subject of using volume and price to determine potential buys in uptrending stocks, or downtrending stocks if you are looking at price breakdowns on higher volume. PRICE is the most important factor to watch IMO, which direction is it moving. Following the volume will give you an idea of how much strength there is to any buying or selling.
Keep Rocking Gramps! :^)

[gramps2]

A 'newbie' Do!!! (SEND THIS TO YOUR PRINTER)

REMEMBER!

'volume b/4 PRICE!!!'

never forget it.

gramps

[Capitalist]

A newbie DON'T:

This is actually just one item off a list that was previously posted, but it's one I've learned from hard experience.

DON'T trade based on price action in the first half hour of the session...they see YOU coming sucker!!

[Naztrader]

Some advice and suggestions for newbies………………………………….

Thank you gramps2 for the invitation to add a post to your thread. In glancing over some of the prior posts, I see many other traders have offered some excellent thoughts and strategies.

In order to avoid being redundant by merely re-emphasizing some of the salient points already posted on this thread, I’m going to take a little different approach and provide a step-by-step general outline for new traders.

Few financial endeavors have occupied the time of more people over the years with less success than attempting to “beat the market.” Countless numbers of people have tried and failed. Particularly in academic circles, it is believed that no one can consistently outperform the averages.

Nothing could be further from the truth!

Granted, everyone cannot beat the market, simply because everyone is the market. But that does not preclude the possibility that some investors, utilizing more sophisticated approaches than the public at large, can earn above average returns on their trades and investments. To do so, however, requires the development of a logical investment strategy, which takes advantage of the very weaknesses that deny superior returns to most traders and investors.

As a prelude to increased stock market profits, it is necessary to reject the concept that chance alone governs who wins and who loses on Wall Street, while recognizing that most speculators who seek a get-rich-quick solution will instead end up amongst the big losers. Traders expecting to double their money every year will fail almost without exception, while those with reasonable expectations and a sophisticated and rational approach will usually be well rewarded for their effort.

The first step in building a successful trading strategy is to learn as much as possible about where stock prices in general are headed. Utilizing a vast array of stock market indicators, such as those listed in the link below, will provide some guidance in determining market direction.

http://www.technicalindicators.com/stocksshortind.htm

The second step is combining information from diverse sources into a single rational forecast. Although many of the indicators work well enough most of the time, virtually none are always correct and rarely do they all ever point in the same direction. Many forecasting models exist; therefore exposure and research are required in order to find which one(s) work best, depending upon each individual trader’s objective.

The third step is developing a stock selection strategy. There are a seemingly endless number of techniques for picking winners, most of which are of dubious value. For starters, here are a few sources I favor:

http://www.briefing.com

http://www.realtimetraders.com

and

http://cbs.marketwatch.com/news/default.asp?siteid=mktw

The fourth step a new trader should concentrate on is developing an approach that combines rational theory with a history of superior results. Evidence is adduced that raises extreme doubts about the validity of the random walk theory. An old Wall Street adage goes, “Don’t tell me what to buy, tell me when to buy it. In fact, what and when are two sides of the same coin. Both are essential to a successful trading strategy.

The fifth step to trading is learning to apply the tools to portfolio management. Traders must define objectives and utilize several methods, in order to improve total returns and adjust risk levels. These techniques include religiously using stop loss orders on losing trades and trailing stops on profitable trades in order to preserve gains. Living to trade another day is one of the main objectives.

The sixth step involves keeping score. The trading game obviously does not yield uniform profits to all its participants. Instead it dispenses large gains or losses to a relatively few traders, leaving most players as small winners and losers. Judging your portfolio returns, including accounting for shrinkage, against the market averages provides a measuring stick in determining relative performance.

Good luck to everyone.


Regards,



Naz

[satorino]

Newbies, my two cents.
Never, never, never enter a trade emotionally. You will always lose money.
Like averaging down a stock you like when it tanks just to show you are right and the market is a fool.
Or taking profits right away because you are afraid of losing it, without looking at the chart to decide whether there is more upside left with small risk.
Buying because you hear somebody that a stock is hot, so you just jump in before it explodes without looking at where the stock is in terms of technicals.
I have done all these mistakes. they have costed me money all the time.

The secret instead is to buy and sell when you hate doing it. That is the time that you are going to buy at the bottom and sell at the top.
Good luck.
Sat.