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Archive for August, 2009

Trading Baskets II: The Crapolio, A Roll Of The Dice In The Stock Market

Aug 31

Posted by admin in Investing, Stocks Mutual Funds

In a previously written article, we expanded the use of the term ?Trading Baskets? to include stocks from different sectors or industries. Now I want to share with you an approach to day trading or swing trading that I had some success with back in the wild and woolly, pinnacle days of day trading that may still work today. Unfortunately, this basket of stocks was dubbed ?The Crapolilo?, a name it just could not shake. You?ll see why.

The crucial element that traders are looking for in any stock, which makes it a good day trade or swing trade, is movement or momentum. There are any numbers of things that can cause movement in a stock. Usually it is news of some sort, either positive or negative. It doesn?t really matter. You are only looking for movement, up or down. However, for this particular strategy we are looking for positive news. Keep in mind that it is not your job as a trader to totally understand why or what is causing the movement in a stock, beyond what it takes to make a quick profit.

If you spend enough time glued to a computer monitor with CNBC blaring in the background and are looking for a stock to make a quick buck on, sooner or later you will realize that there are some familiar names that just keep popping up over and over again. From these repeating names you may want to consider building your own Crapolio.

Start by tracking the stocks that keep coming up over and over again. In this scenario the stocks for which we are looking usually play out the same way every time one of the stocks has news of some sort. Traders will jump on the stock, causing a mad scramble to get in on the move, and the stock will run up in price for a nice gain. The challenge is to be as early as possible on the play, get into the money (profitable), and get out before the momentum turns and the stock retreats. Rest assured, they will retreat because that is one thing all of the stocks we are looking for have in common; they hardly ever hold their gains. If you?re late to get in and even later to get out, you won?t make a dime and will maybe even lose money. It is this phenomenon that the now famous Floyd?s 4-Gets are based upon: Get In, Get Profit, Get Out and Get Away!

So here?s what I did, but remember that this strategy may or may not be right for you. I set aside a percentage of my trading capital for a basket of stocks that became known as ?The Crapolio?. I picked a large number of the stocks I had been tracking, low cost stocks under $5-$10 for the most part, but not always. I charted every one of them as far back as I could, looking for the ones that were most likely to continue to repeat the scenario. I came up with what I thought was a recent low that was going to hold for some time; and I bought half the normal lot of shares I usually traded. (See link below to DTM: Decisive Trade Management and Trading Stops for lot sizes.) Then I waited.

The theory is that sooner or later these stocks will once again have some sort of news event that will move them to the upside. As soon as that news hit, I would be in an excellent position having already bought the stock at a recent low. I would then try to buy an additional half lot or a full lot once the new news event hit the street. Overall, I would be in the shares much earlier on average and be able to take advantage of the move and sell for a profit into the momentum. Being in the stock gave me the ability to lock in a nice profit without having to scramble to get in and scramble to sell before the momentum ran out.

Often, I would be in the stock and the news would hit over night, causing the stock to gap up significantly at the market opening in the morning.

However, this is not called ?The Crapolio? without a reason. High quality stocks do not usually behave this way to the same degree. Those that do are much more expensive, usually $35 or more, making it cost prohibitive for all but the wealthiest traders to use this plan.

As previously mentioned, most, if not all, of these stocks were under $10 and for a reason. These were not high quality stocks; in fact, the opposite was the case. Most were high-risk speculative tech stocks or bio-techs. Many were dot-coms; remember this was in the hay-days of the dot-com boom. As we all know now, there were a lot more dot-bombs than there were successes.

Obviously, this was my own version of Swing Trading.

IT IS IMPORTANT TO UNDERSTAND THESE WERE \”NOT\” BROKEN DAYTRADES. Each stock was chosen, charted and watched over a period of time before it was added to ?The Crapolio?.

I believe this strategy could still work today. However, it is to be considered extremely risky and should only be used with money you can afford to lose.

When trading this or any day trading strategy one should know and use DTM: Decisive Trade Management (see story at http://www.traderaide.com/index.html).

Happy trading!

No permission is needed to reproduce an unedited copy of this article as long the About The Author tag is left in tact and included. We do request that we be informed of where it is posted and reciprocal links will be considered. Email floyd@sbmag.org.

Floyd Snyder has been trading and investing in the stock market for three decades. He was on the forefront of the day trading craze that swept the nation back in the late 1990\’s both as a trader and as the moderator of one of the Internet\’s largest real time trading rooms. He is the owner of http://www.TraderAide.com, Strictly Business Magazine at http://www.sbmag.org

Writen By : Floyd Snyder

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8 Penny Stocks To Avoid

Aug 31

Posted by admin in Investing, Stocks Mutual Funds

There are many good penny stock investments available, which could turn a small amount of capital into a small fortune very quickly. However, to discover these you need to know what to look for and what to avoid. When searching for that one big payoff, steer clear of the following examples.

The Phone Salesman – Anyone who is attempting to sell you investments over the phone should be considered an enemy. They have high-pressure sales tactics, and effective, believable arguments. However, they are not doing you any favors, no matter how good they make an investment sound.
They are operating in their best interest to dump over-the-counter stock on you, and the money you pay in will go into their own pockets, or the pockets of their company.
There has never been a need for good companies that are going places to resort to these type of tactics, but there has always been a need for poor, sinking, or shady companies to do so. If you choose to ignore this advice you deserve what happens to your investment.
You may also run into difficulty trying to find a buyer for your shares once you decide it is time to sell.

Very Low Volume Stocks – Without much trading activity it becomes increasingly difficult to buy or sell for the prices you want. As well, it becomes nearly impossible to get an understanding of where the stock price is heading, or to calculate fair valuations for the company?s stock price.
Not only that, but companies subject to low trading volume generally do not have a lot of positive interest.

The Hot Tip Stock – There are actually professional promoters who make a very good living generating and nurturing rumors about some penny stock that?s guaranteed to go through the roof. The entire concept hinges on the rumor being spread from person to person, at the office, over the phone, or at social venues.
The promotional ploys can be very costly for investors who get involved without special knowledge about the company or the actions of the promoter. In most cases if a stock really is going through the roof you won?t hear a word about it, because a select few individuals will be very intent on keeping the information to themselves.

Guaranteed Performance – If a stock is guaranteed to go up, it will almost always go down. Nothing is ever certain, especially on the stock market. When someone guarantees certain performance out of a stock, they may be a promoter, naive investor, self-serving broker, or have heard the guarantee from another source. In any case, don\’t believe them. Instead check into the company yourself and if you feel it is a good investment, you may want to proceed.

Sinking Ships – When a stock has dropped a lot you may think that, \”it can?t go any lower,\” or that it is \”a good bargain.\” Especially with penny stocks, you need to avoid this type of thinking because many sinking ships don?t ever rebound, and they can go lower, and they aren?t good bargains just because they cost less than before.

Commission Free – If you are interested in getting stock commission free you may think you are saving money, but it generally means that you are buying over the counter stock directly from a promoter or the company.
Either way, they take their own invisible ?commission? from you, either by selling to you for an arbitrary amount which is unfairly high, or selling to you for the asking price rather than the bid price based on their own current valuations.

International Penny Stock – We?re not talking about living in the U.S. and steering clear of Canadian stock, or vice versa. We are talking about penny stock issues from Africa, Australia, European, Russian, or South American penny stock markets. First of all, you won?t be too impressed with the level of investor protection and exchange honesty in some of these regions, and you most certainly won?t be too impressed with the broker fees you incur when trying to purchase internationally.
Besides, if you can?t find good penny stock investments in North America, you won?t be able to find them anywhere else either.

Warrants and Rights – These are not technically stocks, but instead are derivative investments based on an underlying company\’s shares. However, they often appear like penny stocks because they sometimes get listed in the stock pages, and often trade for pennies.
It is unlikely that you will accidentally purchase derivatives, but make sure you know what you are trying to buy by understanding the listing criteria of the paper you are reading, or verifying your purchase with your broker.

To get free information about investing in penny stocks visit http://www.pennystocks.com. They offer information on the definition of penny stocks, getting started, benefits, risks and how to find a good penny stock.

Peter Leeds, one of North America\’s leading Investment Coaches, is a self-made millionaire who has created his fortunes on the stock markets. He has also empowered thousands of individuals to do the same. His personal success and incredible ability to consistently pick money-making stocks has earned him a loyal following of successful investors and has generated significant attention from the financial world.

Writen By : Peter Leeds

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Stock Loans

Aug 31

Posted by admin in Stocks Mutual Funds

Hedge current portfolio positions and gain access to capital resources through loans
against free trading, aged affiliate or aged non-affiliate securities. Make proper use
of your assets while waiting for performance and hedge your position should the
asset move against you.

Whether you need to borrow cash for personal or business purposes, these loans
against stock can be funded in as few as five business days and are available to
insiders, affiliates and common shareholders of publicly traded companies on U.S.
exchanges, as well as other major foreign exchanges.

Big Board or Large Cap stockholders are usually elegible for high LTV\’s while Small
to Mid-Cap stockholders can receive respectable LTV\’s based on exchange, price
and liquidity. Furthermore, no expenses or upfront fees are charged for our loan
programs.

Stock Loan is a loan. It is not a sale. For most of our borrowers, a Stock Loan does
not trigger a capital gains tax event unless they default. And though the proceeds
cannot be put into any marginable securities, they are available for other types of
investments or purchases. Interest can accrue or be paid quarterly.

There are no margin calls. Enron stock investors with a Flagship Stock Loan would
have received 90% loan to value out of their investment – and been free to walk
away without a single margin or house call, even after the infamous fall in share
price.

Yes, literally, walk away. These are \”non-recourse\” stock loans, so that if you wish,
you may simply walk away and owe not a penny more to us as lender, with no
negative consequence to your credit, forfeiting only the presumably devalued stock
shares. Why? We\’ve written private hedges on every share. And though you may have
tax consequences in the event of default, you won\’t have to repay your loan to us.

In the market? Out? Why not both?
So you want your stock investments to stay stock investments. You love your stock
picks. And they aren\’t doing too badly, maybe have some great prospects next year
too. You rightly don\’t want to sell (maybe capital gains taxes are looming?); you
don\’t want to leave the market. But you need the cash. In… Out…Go…. Stay… What
to do?

Consider a Stock Loan for Your Stock Investment. Put a floor on your potential loss,
while keeping all of your potential gain. Stock Loan means you can do both. No
need to sell your shares if you\’d rather leave them in the market working for you…
You can tap their value today ? safely ? so you can have the cash you require.
You\’ll get 90% of the market value and no principle or interest payments, if you
choose to let interest accrue.

But… if the share price increases, that increase belongs entirely to you. The upside
(depending on the type of Stock Loan you choose) from the the stock portfolio is
thus yours. You stay in the market, and out, at the same time. The best of both
worlds!

Afra AmirSanjari is the Principal for Peacock Capital. Peacock Capital specializes in
solving the cash flow challenges of Small/Medium Businesses, Government Vendors
and Individuals with innovative financial solutions by providing a network for
securing operating capital.

http://www.peacockcapital.com;
info@peacockcapital.com

Writen By : Afra AmirSanjari

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Long Term Financial Vehicles

Aug 31

Posted by admin in Stocks Mutual Funds

Investing in long-term financial vehicles give you the most gains but it also puts your funds at greater risk. There is much truth to the saying, ?there is no gain if there is no risk?. Still you can reduce your chances of losing your hard earned money, by researching and taking time to understand what you are buying. Would you purchase a house you?ve only just seen on the outside? Both of these are serious investments and you need to arm yourself with the basic knowledge about the subjects.

So what are the differences you need to consider when investing in bonds, stocks or mutual funds?

What are bonds? When you are investing funds in bonds, you are technically lending your money to a borrower. Who can this be? Some of these are the U.S. government, a state, a local municipality or a big company like General Motors. All these institutions need money to expand, to fund a federal deficit or to finance new ventures. So they borrow funds by issuing bonds. The price you pay for a bond is know as its? face value. The issuer promises to pay you back in a particular day, at a fixed rate of interest stated on the coupon itself. You are safely investing in bonds; these bonds give you a yearly income until the maturity date. When the bond matures, the borrower pays you back the principal plus interest. In most cases, investing in bonds is a minimal-risk free decision.

What about stocks? A share of stock is a certificate of ownership purchased by individuals who are investing or buying a proportional share of the business. The more stocks you buy, the bigger the share of profits you will get and the bigger your financial stake becomes. A stock?s value is affected by the financial situation of the company. Historical trends in stocks have shown that their value rises over time, although there are no sure guarantees. Also with stocks the only assured return is if it appreciates on the open market. And while it is true that there are companies that give their stockholders dividends, they are not obligated to do so.

What are mutual funds? In this financial scenario, you join a group of investors in investing your funds to buy stocks, bonds, or anything else your fund manager decides is worthwhile. If you do sustain losses, these losses are subtracted from the fund\’s capital gains before the money is distributed to you the shareholder. The fund won\’t pass out capital gains to shareholders until it has at least earned more in profits than it had lost.

Remember it pays to do research before investing.

Timothy Gorman is a successful Webmaster and publisher of Debt-Relief-Solutions.com. He provides more debt relief, consolidation and financial planning advice that you can research in your pajamas on his website.

Writen By : Tim Gorman

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Managing Investing And Stock Market Risks

Aug 31

Posted by admin in Investing, Stocks Mutual Funds

Reduce your investing and stock market risks by:

Setting your sights on the long term, patiently riding with the ups and downs!

If you have the time to be patient, you can benefit from time diversification. The more numerous good years for stocks outweigh the bad, pulling your return up.

Thus, if you hold equities for many years, you can expect to realize significant positive growth in your wealth.

Weeding out your laggards!

Don\’t be too patient with laggards. This is the management risk referred to earlier. Underperforming the market benchmarks is a big risk to which many people are oblivious.

The more years you remain with a subpar performer, the greater the damage to your nest egg. Weed out funds that have lagged their peers over the past 18 to 24 months.

Avoiding hard-core market timing!

It\’s not uncommon for hard-core market timers to move between the extremes of 100% stocks during an up market to 100% cash when their indicators signal a major turning point in prices.

Market timing is especially easy to do with mutual funds. Resist the temptation. Participation in the best up months is far more important than avoiding the worst down months, and the really dramatic upward surges in stocks are unpredictable, of short duration, and few and far between. Market timers risk being in cash when the bull stampedes. Missing out can make a big difference in your long-run returns.

Being disciplined and using cost averaging!

Investing monthly in a specific stock is a great way to build wealth and cope with market ups and downs. Your fixed investments buy more shares when prices are down and fewer at higher levels.

Cost averaging can help people become more disciplined because it encourages investing during market nadirs when individuals otherwise might be too fearful. A particularly good strategy is to double up on your investments when prices are depressed, if you\’re able to. This will help enhance your long-term performance, by further reducing your average cost per share.

Copyright ? 2005 I.E.C. Haramis

haramis@greekshares.com

http://www.greekshares.com

Ioannis – Evangelos C. Haramis was born in Greece in 1951 and he studied in Greece, USA and in Belgium. He has been active in the stock markets since 1972. Since 2002 he is New Business Development Managing Director at an Investment Bank.

Writen By : Ioannis – Evangelos Haramis

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Trading As A Business

Aug 31

Posted by admin in Stocks Mutual Funds

What can I expect to make my first year of trading?

We get questions like this one quite often. We find that most aspiring traders don?t have a clue as to what to expect from the market. Yet here they are, putting up their money. Most are going to learn the hard way.

We have no idea in the world what you can expect to make in your first year of trading, or any other year, for that matter. What we can tell you is that without proper guidance and help, you are probably going to have some very bitter experiences. Why? Because your anticipations are almost completely wrong.

Futures traders, especially beginning traders, often open an account with unrealistic expectations of trading performance. These expectations could be formed by the sales literature for a trading program that emphasizes its profitability, by reports of success stories by top traders or by some brokers within the industry. In all cases, you are rarely made aware of the many other times when performances were considerably worse. In other words, you are a victim of selection bias.

Most advertisers of courses, systems, books, etc., will mislead you into thinking that you just can?t lose if you buy what they are selling. We are talking here about hype, major hype ? as much as the authorities will allow them to get away with.

Selection bias is a term well known within the social sciences and occurs whenever some undesired screening factor leads to a misrepresentation of a population sample. For example, traders seldom express their losing trades with as much enthusiasm as their winning trades. Consequently, a random selection of letters or phone calls received by a company that sells a trading program often will overstate the proportion of traders who are doing well.

Sometimes the cause of the selection bias is not obvious. For instance, let\’s say that a trader who purchases a very expensive price and charting package is more profitable than another trader without it. The merits of the package seem obvious. Maybe not. It could be that the individual who can afford to purchase the package is better capitalized than the other trader and this is the reason for the better performance.

Starting off your futures and options trading experience with unrealistic expectations inevitably will lead to frustration and disappointment. It\’s better to face reality now. It will make life as a trader easier down the road. Here are just a few facts to dispel those unrealistic expectations.

1. More traders lose money than make money. The figures are fuzzy, but it is 80% to 90% (maybe more) who end up losers and leave.

2. Within the industry, only a small percentage of retail traders are profitable on a consistent basis. Moreover, if you are just starting out, you should expect to incur some loss strictly due to error on your part as you climb up the learning curve. Increased trading knowledge and experience combined with trading strategies that have superior risk/return characteristics can help put the odds of success in your favor. So, it is important to study the markets and educate yourself before trading or, alternatively, you can rely on the support of your broker professional. Another option you may also want to consider is paper trading. It\’s a viable option because it\’s a lot cheaper to make a mistake in a fictitious account than a real one.

3. You will have losing trades. In fact, most of your trades will be losing trades. It is impossible to predict price movements every time. Even when the technical and fundamental factors are in agreement, the market often moves in an unexpected way. This can even happen several times in a row. For this reason, it is always important to make sure that loss is limited on every trade and that you have sufficient trading capital to withstand several losing trades without being taken out of the game.

4. Don\’t expect to become financially independent. It\’s unrealistic to expect a small-sized account, especially one under $5,000, to generate consistent income to replace regular employment. While this may be possible for a very low percentage of traders, it does often require high-risk trading. High-risk trading means that if you are one of the many who lost money, then you probably lost your money very quickly and you may end up owing even more money to the clearing firm. High-risk trading should be avoided, especially by the beginner. Rather, concentrate on low-risk, low-frequency trading and devote appropriate effort to increasing your knowledge and understanding of futures trading.

Keep in mind that, as a beginner the emphasis should be on learning and proceeding slowly. By that, I mean practicing in a paper trading account and confining your trades to those that have low risk. The expectations of huge profit that many beginners start out with may be realized, but only after you invest the requisite time and energy and only after a slow and realistic start.

Book recommendation: If you choose trading for a living as your desired career, then it is vital that you read the book \”Trading Is a Business\”

http://www.tradingeducators.com/books.htm?source=ezinearticles

Joe Ross, trader, author, and educator, has been an active trader since 1957, when he began his trading career in the commodity futures markets. In 1982, when it became possible to day trade the S

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Bollinger Bands Strategies

Aug 31

Posted by admin in Stocks Mutual Funds

The Bollinger Band theory is designed to depict the volatility of a stock. It is quite simple, being composed of a simple moving average, and its upper and lower \”bands\” that are 2 standard deviations away. Standard deviations are a statistical tool used to contain the majority of movement or \”deviation\” around an average value. Bear in mind that when you use the Bollinger Band theory, it only works as a gauge or guide, and should be use with other indicators.

Normally, we use the 20-Day simple moving average and its standard deviations to create Bollinger Bands. Strategies some investors use include shorter- or longer-term Bollinger Bands depending on their needs. Shorter-term Bollinger Bands strategies (less than 20-Days) are more sensitive to price fluctuations, while longer-term Bollinger Bands (more than 20-Days) are more conservative.

So how do we use the Bollinger Band theory?

The Bollinger Band theory will not indicate exactly which point to buy or sell an option or stock. It is meant to be used as a guide (or band) with which to gauge a stock\’s volatility.

When a stock\’s price is very volatile, the Bollinger Bands will be far apart. In technical indicator charts, this is depicted like a widening gap. On the other hand, when there is little price fluctuation, hence low volatility, the Bollinger Bands will be in a tight range. This is depicted as narrow \”lanes\” along the chart.

As for how we use the Bollinger Band theory, here are a couple of guidelines.

History shows that a stock usually doesn\’t stay in a narrow trading range for long, as can be gauged using the Bollinger Bands. Strategies include relating the width with the length of the bands. The narrower the bands, the shorter the time it will last. Therefore, when a stock starts to trade within narrow Bollinger Bands, we know that there will be a substantial price fluctuation in the near future. However, we do not know which direction the stock will move, hence the need to use Bollinger Bands strategies together with other technical indicators.

When the stock starts to become very volatile, it is depicted in the chart by the actual stock price \”hugging\” or staying very close to either the upper or lower Bollinger Bands, with the Bands widening substantially. The wider the Bands are, the more volatile the price is, and the more likely the price will fall back towards the moving average.

When the actual stock price moves away from the Bands back towards the moving average, it can be taken as a signal that the price trend has slowed, and will move back towards the moving average. However, it is common for the price to bounce off the Bands a second time before a confirmed move towards the moving average.

As usual, and for the Bollinger Band theory in particular, it should be noted that individual indicators should not be used on their own, but rather with one or two additional indicators of different types, in order to confirm any signals and prevent false alarms.

Steven is the webmaster of http://www.option-trading-guide.com If you would like to learn more about Option Trading or Technical Analysis, do visit for various strategies and resources to help your stock market investments.

Writen By : Steven T. Ng

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