Newbie Do's & Don'ts

[Frank Pembleton]

...ask and you shall receive. <vbg>

#msg-2507624

[kirby49]

Hi Michael

Thanks for the addition, I'll look for it. I read somewhere about a book titled "Bull" and hope someone else here comes up with a little more including the author. I have also got Elder's second book (borrowed from Zolt) which I'm almost finished reading for the third time. First half was kind of a repeat of the first book, but the second half includes some new stuff on record keeping.

Anyone else have favourite books?

[Bernard Ng]

Here you go gramps2... I will try not to repeat what others have said...

First...
be very open minded, and work very hard, try to learn new things everyday. For example, for just a little time a day, you can learn how to use certain indicators/patterns/theories. Within a year, you will know essentially every basic T/A materials. By then, you will be able to tell which tools will fit your trading style the most. Keep the cycle going by investigate in depth to the indicators/patterns/theories, and keep replacing your tools with more advanced ones. At the end of the cycle, you will have your own black box trading system. Then you look back to the tools you've learnt at the beginning, and you will laugh out loud, no wonder you aren't making money back then. This is just one example. Work hard and be smart about the information you process daily.

Then...
if you do what I stated above, you will know all the don'ts.

[Capitalist]

So the real NEWBIE DO is...

Figure out what risk control and money management rules you want to use!! This should be done AFTER you figure out what strategy you're using (breakout vs contrarian, long-term vs short term, etc..)

There are several methods; here's a couple that Zeev and I just threw around:

1. Set a maximum amount that you can LOSE on a trade, like 2% of total capital for example. Your individual trade sizes can be larger, but your stops will be tighter as the trade size increases. This is one more suited to an active short-term strategy because it won't tend to tie up your cash.

2. Set a maximum amount that you will allocate PER TRADE (as Zeev said). This means that you don't spend more that 5% of your capital on any position for example. In this example, you could lose your entire position and still be down only 5% on your account. This might be more appropriate for someone who wants to place much wider stops and who is comfortable holding a position at an unrealized loss for a long period of time. One thing to remember: 20 open positions and you're done buying under this method (assuming the 5% figure).

I'm sure there are other risk control methods and examples, but choose one that makes sense for what you're doing.

[Zeev Hed]

I think it should be more what percentage of the capital allocated to training, I suggest no more than 5% to any single position....that assures that even a lousy trade with a halt, does not ruin you and leaves you with enough to come and fight another day.

[Frank Pembleton]

Bob ... great list-- everything you need to know -- I think the only thing missing is Schwager's excellent "Market Wizards" books.

Btw, some kind individual posted a link for the virtual version of "Reminiscences of a Stock Operator" #msg-2485921

[Capitalist]

Right, that's why I would normally recommend that a newbie DO adjust the trade amount (down from $2000 to $800 for instance) based on the stop point, and that a newbie DON'T "mindset flip" their entire strategy to try to get around this.

Bigger trading sizes and split second reversals of strategy can come later...

[Zeev Hed]

Got to be careful with mindset flips, they are dangerous and brings about rationalization of errors, decide first what to do (plan the play) and then do it (play the pan). Not all plays will come through, which is fine, since you should have a plurality of plays ready to go....of course, putting a limit of losing only $100 on a $2000 trade in a very low priced stock might be a folly all by itself, too many whipsaws in that range.

[kirby49]

Newbie Do

Read, Read, Read. Not just the message boards but the best books. Here's a few of my favourites. You will have to cut and paste the URL's.


Battle for Investment Survival - Gerald Loeb
http://www.amazon.com/exec/obidos/tg/detail/-/0471132977/qid=1078795607/sr=1-1/ref=sr_1_1/103-481708...

How Investors Can Make Money Using Mass Psychology: A Guide to Your Relationship With Money
by James Dines,
http://www.amazon.com/exec/obidos/tg/detail/-/0964968908/qid=1078795924/sr=1-1/ref=sr_1_1/103-481708...

Trading for a Living: Psychology, Trading Tactics, Money Management
by Alexander Elder
http://www.amazon.com/exec/obidos/tg/detail/-/0471592242/qid=1078795653/sr=1-2/ref=sr_1_2/103-481708...

Reminiscences of a Stock Operator
by Edwin Lefèvre
http://www.amazon.com/exec/obidos/tg/detail/-/0471059706/qid=1078795706/sr=1-1/ref=sr_1_1/103-481708...

[Capitalist]

I'm not sure if that's a newbie DO or a newbie DON'T, lol!

Hmmm, so change the actual strategy from momentum to contrarian based on the situation? The reason for buying would go from "it's going up so I'll hop on the bandwagon" to "it's going down so I'll try to get a bargain".

I actually keep two separate scenarios like that ready for each stock so I can be more flexible, but it takes some experience (of which I don't really have enough) to know when and when not to apply a quick "mindset flip" like that.

[Zeev Hed]

How about a little variant? I want to buy those 1000 shares, but don't want to lose more than $100 (and the nice support is still $2.25), put an OB (outrageous bid)at $2.30 with a stop at $2.20, you get it, nice, you don't, then play another one....

[Zeev Hed]

Gramps, as per your request, my biggest "do" is "Plan the play and play the plan".

My biggest don't is "don't hope it will bounce back, just take your loss and come to fight another day".

Last, a little turnips wisdom, if the TA and the FA do not jive, believe the TA.

Good luck with your new board.

[junkyardbear]

Newbie D's

1.Don't Rush to get in a stock, any stock..because you want
to trade something. You don't have to be in the market
all the time. It will happen.

2.Do Read eveything you can get your hands on like..
The Market Makers Edge,Daytrader's Survival Guide, Penny stocks
the next American Gold rush..Norm mentioned: Master Daytrader
a very good one.There are also trading Mags.

3.Don't try to over complicate T/A there are enough
indicators out there to make any stock look good or bad.
For me Simple is better...but learn enough to know the difference.

4. Please don't believe the hype, get to know a few honest traders here on IHUB to follow. There are to many good one's to name. But the goal is to find a few stocks you have faith in
and flip them over and over.

5. Don't give up and enjoy.. you have plenty of time.

[gramps2]

A repost.

If anyone feels that a subject has already been covered, please feel free to revisit it. We all have a little different style, wrinkle on any subject.

If 'newbies' see, that the same advice is coming from all different directions/posters it'll sink in, I hope.

I thank all the people who took the time to post here!

I'll bet you've already saved a least one 'newbie'!

Take care.

gramps

[SpillWay]

I thought I would have something to add to the board, but everything I was going to say has already been said.

HOWEVER... I sure did learn a lot from reading the other posts. Gained lots of insightful information that I can actually use. Thanks to all of you for taking the time to do this wonderful board.

Spill

[gramps2]

A 'newbie' & 'EVERYBODY DO'!

Take breaks. Go outside, get some 'O2'! Great for the 'Brain'.

Don't sit all day at the keyboard.

gramps

[Lazarus]

newbie doOby -- dOo you want to make a small fortune...

its very easy

just start with a large one

and trade penny stocks

Lazarus

be careful out there

[harbs]

: )

[TREND1]

Newbie Don't know that a Federal Reserve study shows that after the first year a Newbie has sold all his winners and kept his loses.


Translation:
Newbie does not know how to take losses.
Newbie feels that every stock should turn out to be a winner.

[Dream]

Newbie do: Listen to and learn from SSP (Steve). :) eom

[cintrix]

DO: try and have an clear idea of what your exit price is when you go in - if it reaches it faster than you expected and you think there's a good chance for it to keep going, sell half!

DON'T - be afraid to go back into a position that you previously lost in.

DO - have a set of rules

DON'T - break your rules - at least try not to, too often (you will eventually break them - if you're human).

[originunknown]

Wonder if management have read the book on "Cellar Boxing"?
“CELLAR BOXING”

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.

[gramps2]

Morning All,

If anyone feels that a subject has already been covered, please feel free to revisit it. We all have a little different style, wrinkle on any subject.

If 'newbies' see, that the same advice is coming from all different directions/posters it'll sink in, I hope.

I thank all the people who took the time to post here!

I'll bet you've already saved a least one 'newbie'!

Take care.

gramps

[Bruce A Thompson]

Newbie Do

This is a piece of advice given to me by Zeev Hed The greatest daytrader that ever lived.

So you want to daytrade? First thing you do is go to the bank. Withdraw $10,000 in hundred dollar bills and bring them home.'

Go out to the backyard use the money to build a nice pile in the bar-b-que. Pour starter fluid on the money and set fire to it.

Watch it all burn completely to ashes that can't be taken to the bank and be replaced with new bills.

Now you know what is like to lose $10K. If you can't do this, then don't daytrade at all. You don't have the stomach or the money for it.

What did we learn?

BT

[sublime]

newbie do....ALWAYS keep some funds available for that surprise stock that takes off like a rocket or a real value that you've been waiting for. It's an awful feeling to watch a run that you miss because all funds are tied up.

[SSP]

Do learn to read SEC forms, http://www.nqb.com/quote/filings.jsp?symbol=
Do Daily list searches on all OTCBB for history - many are bad chameleons - http://www.otcbb.com/dailylist/
Do info quotes, check insider trading, http://quotes.nasdaq.com/asp/MasterDataEntry.asp?page=InfoQuotes
Do symbol public message searches, to see who knows about "XYZ"

Too many to mention.

Also I have mentioned more, in detail, in an interview I once had made: http://www.goldenlists.com/interview/index.html

[blurring]

a few of mine:

1) Always know WHY you are entering a trade. Always know why you are exiting a trade. Every single trade.

2) Don't chase. Enter the stock at a level that makes technical sense, knowing beforehand what a technical failure in the stock looks like.

3) Always, always, always, use a stoploss, trailing or otherwise. Never hold a loser. This is dead money. However, also, never use a “physical” stoploss, only a mental stoploss. If market makers want shares, and they can see yours (with Level III), they will come get them. If you can’t trust a stock (because you’ve never traded it before, or because the technical reason for entry is comparatively weak) or watch the stock, and you have to leave your live charts, sell it.

4) Use Chatrooms and Stockboards as WATCH LIST fodder. Use these posts to build your watch lists only. Do not automatically jump in just because you see your favorite guru posting his entry. You are chasing. And, you are not learning if you do this.

5) Learn technical analysis. At a minimum: Learn how to spot resistance and support levels, and learn how to draw trendlines. Also, work on spotting common patterns, cup and handle, head and shoulders, ascending triangles, box formations, Fibonacci levels, etc. These are your tools; a craftsman has to be able to use their tools well.

6) Trust the chart. Have patience. The chart doesn't lie. It can’t. (But also know what your stoploss is).

7) Trade your day in a completely professional manner. Make it serious business. Don't allow sloppiness to enter into your mindset. The marketplace is completely unforgiving, and the sloppy get slaughtered.

8) Keep emotions out of your trades as much as you can. The more closely you can emulate machine-like executions, the more money you will make. Emotions will cost you cash.

9) Never, never, never chase a stock. Up or down. In or out. If you miss your entry, let it go. Another bus is coming soon. If you miss your exit, remain calm. Identify the next support level, and look for a bounce off that. If no bounce comes, exit, calmly, at that support level. Never chase stocks. If you chase, you are trading with emotion. That is a deadly combination.

10) Sell at least half your shares into strength as price approaches a technical area. Lock in profit. However, don’t close a position just because you have made a certain amount of money; sell for technical reasons. You’ll leave less on the table.

11) Be very selective, especially during low volume periods. Practice sitting on your hands.

12) Don't pull money out of a winner, or a fledging position, to chase another stock that might be moving.

13) In general, sell into strength, but into weakness (but only if the overall trend is up).

14) Especially for OTC, have a target exit in mind, at a point of resistance. Watch closely as the stock approaches. OTC stocks can plummet fast; the use of a simple trendline violation won't always work. Use Level II as a tool for entering and exiting a position only. Don’t watch Level II every single moment (unless you are scalping). Market makers will drive you batty.

15) Never try to "beat" a stock. If you get beat by a stock, move on to another issue, unless there is a solid technical reason for re-entry.

16) Paper trade for at least a few months. No one wants to do this. No me, not anyone. Everybody wants to jump in right after they're flush with their first success. And, bonus, guess what? Paper trading won’t teach you everything you’ll need to know. It’s not even that close to the real deal! But paper trading will help immensely. It’ll save you money.

17) Keep a trading journal. Use it. Always include commissions in the cost of doing business. Note your mistakes. Learn from your mistakes. The market punishes mistakes. You’ll want to learn as quickly as you can.

18) Build redundancy into your trading rig. Multiple connectivity points. Multiple access points to your broker. Multiple computers (in fact, multiples of hardware across the board if you can get it), multiple data sources. Stocks can drop very fast. You don't ever want to be blinded by equipment failure. You can lose money. Use the very best trading rig you can get your hands on. Then duplicate it.

19) Know your datafeed/charting software intimately.

20) If you play news, make sure your news server is fast, and make sure you fills are fast. Otherwise, don’t play news.

21) Keep learning. Never stop.

22) Stay humble. The market will eat your ego for breakfast.

23) Eat right, exorcise. Take breaks during the trading session. Learn to meditate. Then, meditate. This is a high stress business, especially while one is learning.

24) There is a human being behind every post; be nice to people in Chatrooms and Stockboards. They are helping you.

25) If you start to make a consistent profit, don’t forget to pay yourself.

and, finally, The Trend Truly Is Your Friend.

[Ruellit]

Newbie Do:

Need links for DD? Check this out!
http://www.investorshub.com/boards/board.asp?board_id=474

[gramps2]

Evening 'REO',

Your question deals with 'Money Management' & 'Trading style'.

You 'MUST' diversify.

Lets say you're at a 'Buffet', you only have one plate & one pass at the food. I'll bet you'll squeeze as many 'delights' as possible on that plate. Yet there will be more of one item than any other. Because 'YOU' like it, & not because somebody told you to like it...

Buy the most of the 'SYMBOL' you've done the most 'Due Dilligence'(DD) on, and that 'YOU' like the best!

Only you can decide how much or what % of your hard earned money to put on any one position.

Hope this helps.

Now i'm hungry!!

gramps

[EVO]

Dont ever put all your eggs in one basket!

[Bak2houston]

Newbie Do:
Have a written plan for every trading day. For example:
Know where your stops are for every thing you already own,
Have a list of already charted stocks that you would be willing to buy for the following day and what criteria they need to meet in order for you to buy them,
If you alread know what 'don'ts' your susceptible to, write them down for re-inforcement,
(that's just a couple - put in your plan what YOU want to do)

Rarely will your trading day exactly follow your plan but having a good plan can take a lot of stress out of trading and will almost assuredly increase your chances for success.

[njnorm]

Great list harbs!

Many of those are my favorites and sometimes I even do them and the more times I follow those rules, the better i do.

I would like to add 2 which are magic for me...

PAY OFF YOUR DEPTS AS YOU CAN WHEN YOU MAKE A LOT OF MONEY IN THE MARKET
- There is no better reward than to have made a great trade where you've made lots of money on it and take most of that money out if you can. Once I was lucky enough to find a windfall that I used to pay off my entire depts and what a relief that was.

MY OTHER FAVORITE IS READ READ READ...
- I always read as a way to brush up on ideas I have either forgotten or need a refresher on.

My ABSOLUTE favorite book is "TOOLS & TACTICS FOR THE MASTER DAY TRADER
By Oliver Velez and Greg Capra (the Pristine.com guys)

It is the best 389 pages you will ever read in your trading career - and yes if you do this for serious money you must treat it like a career and invest time and money in getting great at it.

[Dream]

Newbie do: Try to find out what works for you when trading stocks. Due Diligence or T/A. There are traders that lean more heavily on one or the other and it works for them. Just try to include both, especially if your trades are not in and out in the same day. I lean toward DD because I tend to stay in stocks more than a few days. I've been trading pennies for quite a while now and find that my DD plays a better part in increasing my portfolio than T/A.

Again, others are more into T/A. If it works, don't fix it. Anyhow, IMO at least use a little both this will add to safer trades.

[Dream]

Newbie don't: Don't buy a stock just because you saw it mentioned on a message board. Always look into it yourself. You know 'always do your own DD'.

[Capitalist]

A Newbie DO and a Newbie Dont!!

DO determine the size of your trade based on a rationally selected stop loss point and your risk control rules.

DON'T select your stop loss point based on the size of your trade. This is backwards.


Here's an example: WXYZ is trading at 2.50, and there is a nice support level at 2.25. Also, my risk control rules tell me that I am not willing to lose more than $100 on this trade

The wrong way: "OK, let's see...I'm going to buy 1000 shares of this, so I better set my stop at 10 cents down so I don't lose more than $100. I'll set it at 2.40. (huh???)

The right way: "OK, let's see, based on my chart the best stop point should be at 2.25 which is a 25 cent per share loss. So if I don't want to lose more than $100 I should only buy 100/.25 = 400 shares.

[originunknown]

Find the type of trading that works best for you.
Be open to learning from others.
Control emotions such as greed.
Enjoy what you are doing!

[babycakes]

as a newbie, the first thing that you must do is to stop watching cnbc during the day, and if possible, at night. If you find a need to have it on in case of breaking news, have it on with no volume.

[gramps2]

A 'newbie' Do for everyone...

'Patience' is free, and yet at the same time...'priceless'!

gramps

[magician]

Newbie Don't - DONT chase stock entries...

many newbies make the mistake of chasing a popular stock nad end up being a bagholder

if you miss the entry dont worry, there always be another stock to buy

your trading capital is you most important trading tool - without trading capital you cant trade! Bagholdiing stocks eats up capital!

[gramps2]

A 'newbie' Do,

Bad/losing trades can have a bright side...

If a 'newbie' or anyone for that matter makes a bad trade..."It's only a losing/bad trade if the person doesn't 'learn from it'"

If you learn somthing from a bad trade the money you lost is called....'TUITION'!

gramps

[Lazarus]

newbie doOby dOo - number tW0...

after doing #1

decide if you are going to make an investment or a trade.

there is a HUGE difference between the two.

Warren Buffet who is listed as the 2nd wealthiest individual in the world says you should never buy stock in a company if you would not be happy to own it at half its current price. he also buys large pieces of companies or entire companies with NO EXIT STRATEGY.

wait - i thought if it dropped 8 or 10% that means i should sell. well...if you bought it just to trade and you feel that's what is necessary fine.

decide up front.... am i just buying this paper to flip it at a higher price or am i buying a piece of this company because i believe in its long term potential. in other words - SEPERATE YOUR INVESTMENTS FROM YOUR TRADES.

read IHUB for information on how to TRADE but go here for to learn about INVESTING: http://www.berkshirehathaway.com

begin by reading the annual reports.

you need to know WHAT you are buying and WHY you are buying it.

be careful - if you want to TRADE shares of a company then dont view your purchase as an INVESTMENT. if you are investing in a company then you should view your purchase of shares as a purchase of a piece of the company and not necessarily as a trade.

if i own shares of a company and am long and view my position as an investment... the stock can drop 50% and i wont flinch...in fact, i will generally view it as a buying opportunity.

on the other hand - if im just flipping paper...the stock doesnt even have to drop. i might sell it for the same price i bot it for or sell it if it dips 1% because i didnt buy it as an investment - i just bot it to trade.

traders make money and investors make money...but i dont see any traders on the list of the worlds wealthiest people.

Berkshire Hathaway stock is $93,000.00 because Warren Buffet decided early on that he would not split the stock in order to keep TRADERS away: http://finance.yahoo.com/q?s=BRKa&d=t

Lazarus





Lazarus

[REO]

Question. Do you guys have a rule of thumb you would like to share regarding how you decide how much money you are willing to put at risk in a particular stock? Do you base your decision upon volume, float, share price, percentage of your portfolio or how liquid you are at the point of entry? (some, all, none of the above) I read the posts credited to Hack, Lance and Harbs on this board. I've also read some very good info that was provided by Buzz, Omni and a few other respected traders on Ihub, but most of these adress protecting profits once you have entered and not the amount you should enter with.

I'm at the point now where I can risk several K at a time and would appreciate your opinions on this subject.

Thanks in advance.
REO

[excel]

MacSusan. Patience, perseverance and maintaining a positive attitude does wonders.

So very true. Great advice!

[~ Susan ~]

Newbie "Do"...

When you are learning how to trade be patient. Some people learn slower/faster than others so some people will need to be more patient than others. And try not to beat yourself up if you just don't "get it" right away. Patience, perseverance and maintaining a positive attitude does wonders.

[excel]

One of the King of Bounces has spoken! The other being Lance imo. Anytime you think of something post. Please do.
Learn a lot from you.


I love this one. So true!

-TAKE A BREAK DURING THE TRADING DAY - some of by worst trades have come after a very good or very bad trade where i either felt invinsible or angry - and either state of mind will kill u in the market.

Yep. If you aren't getting that high than your preperation to succeed will go down along with your success!

MAKE SURE U ENJOY - if you don't enjoy trading and find yourself in a 1/2 state of panic, maybe this is not for you...it takes a certain type i believe : )

[gramps2]

Ya, can't delete quality, & 'Class'.

gramps

[sublime]

newbie do ....watch out for fear and greed. fear can cause you to sell a stock too soon and greed can cause you to hold it too long.

fear and greed are two major factors in trading. that was a big surprise for me as a newbie because they were two emotions that i was not accustomed to. I have been shocked at how greed can grab ahold of me before i know it!

I wish this board had been here when i started!!

good luck everyone and if you have found ihub as a newbie, well...you are very fortunate. sub

[excel]

Edit. Already posted. Please delete Gramps!

[excel]

Great idea for a board Gramps! I will surely member mark it and try to learn from you all.

[Lazarus]

newbie doOby dOo...

learn to read SEC filings.

Lazarus