I loooove charts. I say, use them.
Fundamentals are cool, too, but such a chore!
I'm an impulsive type. I'm sticking with the charts.
But, can you actually find a good trade with charts? Isn't it all just an illusion? Doesn't it look like there are patterns, but actually they aren't meaningful?
What the actual truth is, I can't really say. I'm actually a failed investor, but I've stuck with it, reviewing hundreds of charts a year for 30 years, and I'm starting to feel I understand what's going on.
And it makes me mad that people are being told they can't make it in the stock market. What are they telling you? That you have to risk too much money? I'm telling you you only need to risk a little money. Are they telling you it's all a big scam and only crooks succeed in it? No! The stock market provides capital for all sorts of wonderful industry. Creating capital is incredibly productive. Your tiny investment creates millions of dollars worth of valuable goods. You are being rewarded for being smart with your investments: you chose really productive places to put your savings, which means more abundance for everybody. Finally, is it, as they say, impossible for you to do well? Are you just not smart enough to beat the market? (Nobody is, right? Except for a few, right?) Is doubling your money in a year way, way too much to expect? Well, I think you're smart enough. It's not that complicated. You just need some basic insight. Read on! And, is doubling your money a ridiculous thing to expect? Well, do some kind of survey of stock charts. Make a list of companies you know ... GE, Apple, Starbucks, etc. Look at a ten year chart for each company. How many of them, during some part of those ten years, didn't double?
Um, well, Apple, in the last 5 years (quickly found a chart) doubled in a year, then doubled again in two years. GE fell by 80%, but then doubled in a year. Starbucks fell by 80% but then doubled in a year and doubled again in two years.
Well, sure, these are famous companies, and they're famous for a reason. Buy my scanning course, and learn how to create lists of arbitrarily selected stocks - or just figure it out yourself. Look at each chart on a list, and see how many have doubled at some time in the past. How many have doubled several times. Bet you it's a lot of them.
Stocks double and quadruple and go up ten times with great regularity - not ephemeral whilothewisps but massively traded great companies. They also go down 50%, 75%, 90%, with great regularity. And they do that and then go back up with great regularity.
There's a truism in the markets - goes with the truism that you are safest expecting a modest return, and that you aren't smart enough to beat the markets - that timing the markets is dangerous. Wrong! Timing is everything. Buy my timing course next (but also buy my scans course).
Tuesday, November 22, 2011
how to avoid risk
How much money do you need to play and maybe win?
It depends on the return you expect from a typical trade.
If you only expect a 10% annual return, you can expect to double your money in about 10 years. Let's say your goal is to have $100,000 in ten years. (This is by investing in stocks.) you need to invest $50,000 today.
What if you expect to double your money in 1 year. You can almost multiply your money by 10 in 3 years, so you can multiply your money by 10 3 times in 10 years. Let's see, $100x10(3years)=$1000x10=$10,000x10=$100,000. Spot on target! So, if you can double your money every year, you can turn $100 into $100,000 in ten years.
Do you have $50,000 to risk in the stock market? If you put the money in, it's at risk.
Do you have $100 to risk in the stock market?
Yes, you do. You can play.
But you don't want to play and lose, even if you're only risking a little. Can you, a true non-expert, play this game and win. I really think you can.
Yes, I recommend setting your sights high, only risking a little, and applying some basic smarts, as a recipe for security: security from loss in the markets, and security from future poverty.
It depends on the return you expect from a typical trade.
If you only expect a 10% annual return, you can expect to double your money in about 10 years. Let's say your goal is to have $100,000 in ten years. (This is by investing in stocks.) you need to invest $50,000 today.
What if you expect to double your money in 1 year. You can almost multiply your money by 10 in 3 years, so you can multiply your money by 10 3 times in 10 years. Let's see, $100x10(3years)=$1000x10=$10,000x10=$100,000. Spot on target! So, if you can double your money every year, you can turn $100 into $100,000 in ten years.
Do you have $50,000 to risk in the stock market? If you put the money in, it's at risk.
Do you have $100 to risk in the stock market?
Yes, you do. You can play.
But you don't want to play and lose, even if you're only risking a little. Can you, a true non-expert, play this game and win. I really think you can.
Yes, I recommend setting your sights high, only risking a little, and applying some basic smarts, as a recipe for security: security from loss in the markets, and security from future poverty.
It's clear at a glance that stock charts look like ocean waves. But are they really like ocean waves?
In the sea, you'll have a thousand waves, one after another, that are mostly the same height and depth. Isn't the stock market quite irregular, compared to that? Sure, it's easy to find several similar waves in a row, in charts, but then prices move to new levels, either up or down. The patterns don't hold up.
But think about this: If you were on the shore, and you measured each wave for a whole day, your chart would go up and down and up and down, but then it would start to go down more each time, so, really, your chart would go down and down and down, until, actually, the tops of the waves might be below the bottoms of earlier waves. We're talking about tidal action, here. And you could tell when low tide was reached, because the waves would start to all be about the same height, and the same depth, instead of each one being lower than the last. The bottom of a big wave - the tidal cycle - is sort of round and flat.
OK, you've measured waves for a whole day. Your chart shows wave heights and depths going up a little, and then going down down down, rounding off, then going up, up, up, and now they've rounded off in to a top and started to go down again. Where are you going to look for the next low tide? You know that tides, too, vary in height and depth. The next tide is likely to be slightly different from the last one. But, pretty much, you can predict the level of the next low tide, and, when it arrives, you'll see the evidence of it, the rounding off of it.
And you'll see bottoms in the bottoms, the bottoms of waves at the bottom of a tidal cycle. You're riding in a little boat, and the waves are going up and down - ever heard of a stock letter that makes you sea-sick before? - up and down. You can feel the boat going up a wave ... ah, we're coming to the top, whee, down we go, boom! That's the bottom! Well, you know it's low tide, so your job is to buy at the bottom of a wave. You've now bought at the bottom of a bottom.
So, look at the charts. The illustration is quite typical. In a ten year period, there's been a big wave, up and down. That's your tidal cycle. It's quite convincing. It's pretty easy to see the bottom rounding off. We just need to buy and wait for the next high tide.
The wave is rounding off at the bottom, and the bottom seems to be at 8. You can clearly see the low of an earlier tidal cycle, seven years ago, also at 8. You might note that that low was sharp and sudden, not rounding off like this one is. That's evidence of where we are in an even longer cycle. Does it affect our decision-making, here? I'm inclined to say it doesn't. It could be a useful thing to think about, though. If you can learn when to expect a sharp-bottomed wave, by analyzing longer cycles, you might be able to buy at some of those sharp bottoms.
Right, now, though, we're in a rounded bottom type pattern, at an established longer cycle low. This looks good. Buy at a bottom in a bottom, that's the rule. Look, the long term cycle high is 34. The recent and past long term cycle lows were 8. We're just past the top of a wave in the long term cycle bottom, and even headed down a little. Let's say we're at 12. Even if the next long term cycle tops out well below the last one, it only has to go to about 25 to double our money ... after commissions.
I equate this with Graham's margin of safety. The next long term wave is likely to go to 34, and we only need to ride it to 25 to achieve our goal in the trade.
Don't buy higher than the last price on this chart, though. There's no sign of a bottom in the short term wave we're in, yet. It's a safe bet you can easily buy it at the last price, and not higher.
See, the key mistake everybody's making is, they see something going up, and say, oh, I need to buy it now!. No! You need to buy when something is going down!
Are these long term cycles rooted in legitimate business? Yes! The stock is available at a bargain price. The company is run by purposeful experts, determined to succeed. Succeed they do. The price of the stock goes up. The early investors are well rewarded. They are interested in selling. The company's successes give it legitimacy as an investment vehicle. Larger players decide to cash out some of those early investors. But then more and more of the early investors cash out. The market starts to say "uh uh uh". We're not cashing out any more of you guys. It's time to get some new investors in here. We're dropping the price. So the stock becomes a bargain again.
Another worry is, is this company going out of business? You can really look at the chart and tell. Is trading robust. At this long cycle low, is the stock moving up and down with vigor? At its earlier long cycle lows, was it vigorous? Did it produce a strong price surge, and a sustained top? But you can take a look at the fundamentals, too. Is the company selling $100,000,000 worth of something, or, on a regular basis, $10,000,000 worth? Is it making some money, too? Or is it in a very dynamic industry (i.e., drugs)? Ten million dollars of sales every year is worth a lot of money, and getting there took a lot of doing. The people running these companies have a lot at stake, and they're good, too. They're going to work hard, and produce another wave of successes, and of profits for you.
Just kind of an odd note to wrap up with: I'm sort of suggesting buying and selling near the bottom. Maybe that's silly of me ... in fact, almost certainly it is ... why not ride a cycle to near it's top, then sell right away when it gets there, and look for something at a cycle bottom to invest in anew? ... but the idea of going for a double, cashing out, and looking for another one, is kind of fun. What I'm wondering is, what kind of role would we be playing in the markets? You're like a wholesaler. Through astute buying, you got a bunch of this stock at a really good price. Now, a retail buyer realizes a long cycle bottom is in place, and wants to get in on it. You say "I'm getting a good profit, I'll sell you some shares." You're a retailer. That's a service to people.
The people selling at the bottom are like the earth in which the crops grow, that sustain us. Innocents, sheep. Mostly they toil and accept a small reward, a decent life of some kind. Their happless wanderings into stocks haven't hurt them too badly, and haven't helped them either. Now, you're there, offering a little money for their shares, and they say "ok". Mostly, they are there, saying, "will anybody give me anything for these shares?" You happen to be there, and you offer them something, and they take, and say thank you. It's a bit hard hearted of you, but you've got a job to do, and you're not being evil about it. You're just harvesting the bounty of the earth, which would lie in the fields rotting, if you didn't.
No? You're not sure you agree about the ethics of this? What about if you think about it this way: What if you are doing it for a great reason? I mean, I think enjoying yourself and being secure and free is a great reason to do something, but, if that's all you do, you may land in trouble, eventually. You've got to bring lots of people along for the ride, when you hit the big time. Do something interesting with a lot of your money. Be ambitious. Be somebody. Be a scholar. Be a philosopher. Find people doing crazy, out there things to help lots of people have great lives, and invest in their projects. Be a leader and promote ideas. Build wonderful things and give them to people, or sell them cheap. Become someone who can sell things cheap and make a lot of money doing it. Host wonderful parties for thousands of people. Or for dozens. Or for your grand kids. Learn the value of frugal living - the absolute terrificness of it - too. Keep the same house for years and years, and truly make it your own. Plant trees in the garden. Turn off the stupid ac and suffer the heat in the summer, and, in the winter, make a herculean effort and heat your house with clean burning kindling in a Rumsford fireplace. Collect a set of dishes and cookware to last your whole life and delight everybody. Choose your furniture well and then keep it for 20 generations. Meditate on everything that's old and beautiful. Teach these methods to others.
is there money?
Looking at a random selection of stocks, how many have, during the time for which a chart is available, doubled after making a predictable bottom?
Recording format:
fail/succeed: symbol, bottom date, predictable bottom, earlier high, later high, fail/succeed
open order: symbol, predicted bottom, earlier high, last price, signal date, open order
open trade: symbol, trade date, predictable bottom, earlier high, last price, open trade
vsnt, 2005, 2.5, 30, 30, succeed
vly, none, none, none, none, no pattern, 7.5, 21, 12
ve, 2003, 20, 30, 90, succeed, 20, 90, 10 (fail)
valu, 2005, 30, 75, 59, fail,
valu, 2009, 20, 55, 35, fail
valu, 2011, 13, 55, 13, open trade
unam, 2003, 3, 7, 14, succeed
unam, 2008, 7.5, 11, open trade
umpq, 2002, 4, none, 30, succeed
umpq, 2009, 8.5, 30, 16, fail
umpq, 7, 30, open order
ubs, 2002, 7, none, 55, succeed
ubs, 2008, 20, 55, 22, fail
ubs, 7.5, 55, 12 2009, open order
tyw, 2005, 13, none, 16, fail
tyw, 2007, 12.5, 16, 13.25, fail
tyw, 2009, 5.5, 16, 12, succeed
tyw, 5.5, 16, 11, 2009, open order
ttf, 2002, (3.5), (5.5), 12, succeed
ttf, 2008, 3.5, 14, 14, succeed
ttf, 3, 14, 12, 2008, open order
tkf, 2004, 5, none, 30, succeed
tkf, 2007, 16, 30, 16.5, fail
tkf, 2009, 5, 30, 19, succeed
tkf, 5, 30, 12, 2009, open order
tcrd ---
tbi, 2003, 6, none, 26, succeed
tbi, 2009, 6, 28, 16, succeed
tbi, 6, 28, 12, 2009, open order
taxi, 2003, 3.25, 9, 13, succeed
taxi, 2008, 6, 14, 12, succeed
taxi, 2009, 3.25, 14, 12, succeed
taxi, 3.25, 14, 12, 2009, open order
sybtp ---
surw, 2005, 20, 55, 30, fail
surw, 2009, 7.5, 55, 15, succeed
surw, 7, 55, 12, open order ***
sunhv ---
strl, 2004, 4.5, none, 30, succeed
strl, 7.5, 30, 12, open order ***
stfc, 2003, 14, none, 38, succeed
stfc, 2008, 17.5, 40, 20, open trade/fail
stfc, 2011, 12.5, 40, 11, open trade
stel, 2003, 8-28 in 5 y, succeed
stel, 2008, 13, 28, 15, open/fail
stel, 8, 28, 2009, open order ***
stbc, 2002-2005, 12 to 24, (succeed)
stbc, 2007, 13, 24, 17, fail
stbc, 3.75, 24, 12, open order
ssw, 2005-2007, 18 to 37, (succeed)
ssw, 2009-2011, 5 to 20 (succeed)
ssw, buy today at 11, buy if available at 7, 35/20, open order **
srdx, 2004, 20 (clear signal), 40, 55, succeed
srdx, 8, 55, 2010, open order ***
sos ---
skyw, 2003, 9, 26, 34, succeed
skyw, 2009, 8, 32, 18, succeed
skyw, 8, 34, 12, open order ***
Recording format:
fail/succeed: symbol, bottom date, predictable bottom, earlier high, later high, fail/succeed
open order: symbol, predicted bottom, earlier high, last price, signal date, open order
open trade: symbol, trade date, predictable bottom, earlier high, last price, open trade
vsnt, 2005, 2.5, 30, 30, succeed
vly, none, none, none, none, no pattern, 7.5, 21, 12
ve, 2003, 20, 30, 90, succeed, 20, 90, 10 (fail)
valu, 2005, 30, 75, 59, fail,
valu, 2009, 20, 55, 35, fail
valu, 2011, 13, 55, 13, open trade
unam, 2003, 3, 7, 14, succeed
unam, 2008, 7.5, 11, open trade
umpq, 2002, 4, none, 30, succeed
umpq, 2009, 8.5, 30, 16, fail
umpq, 7, 30, open order
ubs, 2002, 7, none, 55, succeed
ubs, 2008, 20, 55, 22, fail
ubs, 7.5, 55, 12 2009, open order
tyw, 2005, 13, none, 16, fail
tyw, 2007, 12.5, 16, 13.25, fail
tyw, 2009, 5.5, 16, 12, succeed
tyw, 5.5, 16, 11, 2009, open order
ttf, 2002, (3.5), (5.5), 12, succeed
ttf, 2008, 3.5, 14, 14, succeed
ttf, 3, 14, 12, 2008, open order
tkf, 2004, 5, none, 30, succeed
tkf, 2007, 16, 30, 16.5, fail
tkf, 2009, 5, 30, 19, succeed
tkf, 5, 30, 12, 2009, open order
tcrd ---
tbi, 2003, 6, none, 26, succeed
tbi, 2009, 6, 28, 16, succeed
tbi, 6, 28, 12, 2009, open order
taxi, 2003, 3.25, 9, 13, succeed
taxi, 2008, 6, 14, 12, succeed
taxi, 2009, 3.25, 14, 12, succeed
taxi, 3.25, 14, 12, 2009, open order
sybtp ---
surw, 2005, 20, 55, 30, fail
surw, 2009, 7.5, 55, 15, succeed
surw, 7, 55, 12, open order ***
sunhv ---
strl, 2004, 4.5, none, 30, succeed
strl, 7.5, 30, 12, open order ***
stfc, 2003, 14, none, 38, succeed
stfc, 2008, 17.5, 40, 20, open trade/fail
stfc, 2011, 12.5, 40, 11, open trade
stel, 2003, 8-28 in 5 y, succeed
stel, 2008, 13, 28, 15, open/fail
stel, 8, 28, 2009, open order ***
stbc, 2002-2005, 12 to 24, (succeed)
stbc, 2007, 13, 24, 17, fail
stbc, 3.75, 24, 12, open order
ssw, 2005-2007, 18 to 37, (succeed)
ssw, 2009-2011, 5 to 20 (succeed)
ssw, buy today at 11, buy if available at 7, 35/20, open order **
srdx, 2004, 20 (clear signal), 40, 55, succeed
srdx, 8, 55, 2010, open order ***
sos ---
skyw, 2003, 9, 26, 34, succeed
skyw, 2009, 8, 32, 18, succeed
skyw, 8, 34, 12, open order ***
Monday, November 21, 2011
a sample search
I've had to look through quite a number of these 11 to 12 dollar stocks to find one I'm at all satisfied. I want a really convincing historical low to trade from, and historical high prices that at least aren't barely my target. I want to feel the stock will go to my target fast and without hesitation when I buy it. The one I've finally found just meets these requirements. There's no history of truly high earlier prices, but there's a pretty solid history of historical highs a bit above my target. The historical low is quite dramatic, with a spike low and up and down action. I'm going to try to buy at the spike low. There will probably be a wait to get that price, but I think it'll be reached eventually - within months, say.
wbco 2011 11 21, buy at 6 (not above).
wbco 2011 11 21, buy at 6 (not above).
what if it goes down?
What to do if you buy a stock, based on the methods outlined here for buying low, and it goes down?
I'm hoping you feel some confidence in the stock. I'll write more about that. How does the chart feel to you? If you like the stock, when it goes down by 50%, you can buy another batch of shares, with even less risk.
Your other option is just to hold on. I don't think there's much point in selling. You'll just loose your money. Stocks you buy will go down, sometimes. They'll go down by 50%, even 75% or more, sometimes. (If you like them at 50%, buy them again at 75%. There's a system to this. If you buy the same number of shares at each price, you can basically keep adding shares and never invest more than double your initial investment. You have to account for commissions, though.)
You should, after all, not be buying a lot of any stock. The best way to start with this system is probably to find a few stocks that actually are trading at historic lows, or otherwise really attractive prices, and buy $100 worth of each. Then, watch them, and wait for sales. You're only going to sell them if they double, so, if the system is a bust, well, you're out that money. But, hopefully, you'll get a double quite soon. Then you can start investing again. Replace the one you sold with one or two others.
Some considerations, here:
If you are only investing $100 in a stock, and it's trading above $1, you will be buying odd lots, and you won't be able to place all or nothing good until cancelled orders. That's probably not important if the stock is actively traded - you can just use a non-all or nothing order - always a limit order. If the stock is not actively traded, I wouldn't recommend that. You will just have to use day only orders. Always limit orders. What is an actively traded stock? Your order should be just a drop in the bucket compared to a typical day's volume.
If you plan to sell for a double, $100 is sort of the least you'll want to invest. Factoring in commissions, your profit is likely to be $80, after commissions. If you want to make real money with even smaller investments, you need stocks that will go up not by 100% but by, say, 300%. It's probably not unreasonable to think you can find such stocks, using the methods described (the gut method and the low price method). I'm just saying.
I'm hoping you feel some confidence in the stock. I'll write more about that. How does the chart feel to you? If you like the stock, when it goes down by 50%, you can buy another batch of shares, with even less risk.
Your other option is just to hold on. I don't think there's much point in selling. You'll just loose your money. Stocks you buy will go down, sometimes. They'll go down by 50%, even 75% or more, sometimes. (If you like them at 50%, buy them again at 75%. There's a system to this. If you buy the same number of shares at each price, you can basically keep adding shares and never invest more than double your initial investment. You have to account for commissions, though.)
You should, after all, not be buying a lot of any stock. The best way to start with this system is probably to find a few stocks that actually are trading at historic lows, or otherwise really attractive prices, and buy $100 worth of each. Then, watch them, and wait for sales. You're only going to sell them if they double, so, if the system is a bust, well, you're out that money. But, hopefully, you'll get a double quite soon. Then you can start investing again. Replace the one you sold with one or two others.
Some considerations, here:
If you are only investing $100 in a stock, and it's trading above $1, you will be buying odd lots, and you won't be able to place all or nothing good until cancelled orders. That's probably not important if the stock is actively traded - you can just use a non-all or nothing order - always a limit order. If the stock is not actively traded, I wouldn't recommend that. You will just have to use day only orders. Always limit orders. What is an actively traded stock? Your order should be just a drop in the bucket compared to a typical day's volume.
If you plan to sell for a double, $100 is sort of the least you'll want to invest. Factoring in commissions, your profit is likely to be $80, after commissions. If you want to make real money with even smaller investments, you need stocks that will go up not by 100% but by, say, 300%. It's probably not unreasonable to think you can find such stocks, using the methods described (the gut method and the low price method). I'm just saying.
how to choose a price for buying
You are looking at a 10 year chart. The stock has gone up and down a couple of times, in fairly big waves, during that time. There's an earlier very distinct bottom. Now, prices are approaching that low again. Actually, let's say prices now are twice that low. That's an interesting place to buy, because you can buy here, and then, if it goes down further, you can buy again at half your first price, which means you can double your holdings for only 50% more, or triple your holdings while only doubling your investment.
But, just because the stock is down doesn't mean it's making a bottom. You should probably only buy here if there's a definite signal. Remember, that lower bottom is like a powerful magnet, pulling prices down towards itself. Even if a bottom is signaled, there's a chance prices will go lower, even to the old low.
But there could be signals that are compelling, in a market like this. Chief among them would be a spiky low. Basically, I'm placing orders at major bottoms, and and spiky lows, and, if a stock has returned to the area of a major bottom, and makes a spiky low, I place an order at the spiky low.
Orders placed at spiky lows aren't guaranteed to be filled. Prices are very likely to dip back towards the low, but might rally before making it all the way there. If they are going to do that, they will usually give a signal. One such signal could be another, smaller spiky low near the earlier one. Move your price up to that one. Another would be a period of narrow sideways motion - describing almost the point of a needle, near your spike low in price, pointed towards the future. In that case, place your order at the market price - at the point of the needle - but use a LIMIT order. Prices could jump any time. (You don't want to jump with them, by using a market order.)
Spiky lows can be really crazy looking. You'll think they're some kind of mistake. I think those are very significant. They can also be quite tiny. A tiny but very distinct spiky low near other low price indicators could be a good buying opportunity.
You can sometimes order at spike lows from the past. There are also stocks that have dropped substantially, say by 75%, at some time in the past, and then tracked sideways near the new low price area for several years. Though this is not a guarantee the price will go up, if the overall chart speaks to you - narrow sideways action for an extended period at a low price, and looking strong somehow - ... well, I'm placing that kind of order.
But, just because the stock is down doesn't mean it's making a bottom. You should probably only buy here if there's a definite signal. Remember, that lower bottom is like a powerful magnet, pulling prices down towards itself. Even if a bottom is signaled, there's a chance prices will go lower, even to the old low.
But there could be signals that are compelling, in a market like this. Chief among them would be a spiky low. Basically, I'm placing orders at major bottoms, and and spiky lows, and, if a stock has returned to the area of a major bottom, and makes a spiky low, I place an order at the spiky low.
Orders placed at spiky lows aren't guaranteed to be filled. Prices are very likely to dip back towards the low, but might rally before making it all the way there. If they are going to do that, they will usually give a signal. One such signal could be another, smaller spiky low near the earlier one. Move your price up to that one. Another would be a period of narrow sideways motion - describing almost the point of a needle, near your spike low in price, pointed towards the future. In that case, place your order at the market price - at the point of the needle - but use a LIMIT order. Prices could jump any time. (You don't want to jump with them, by using a market order.)
Spiky lows can be really crazy looking. You'll think they're some kind of mistake. I think those are very significant. They can also be quite tiny. A tiny but very distinct spiky low near other low price indicators could be a good buying opportunity.
You can sometimes order at spike lows from the past. There are also stocks that have dropped substantially, say by 75%, at some time in the past, and then tracked sideways near the new low price area for several years. Though this is not a guarantee the price will go up, if the overall chart speaks to you - narrow sideways action for an extended period at a low price, and looking strong somehow - ... well, I'm placing that kind of order.
easy trading
What should you do if you're not sure you can watch a stock every day?
Use limit orders. Use all or nothing good until canceled orders. Do this for both buying and selling. Pick a stock trading at a price you like, with more than 2x upward potential, as told by the chart. Use a good until canceled all or nothing limit order to buy it at the price you like. Then, place an all or nothing good until canceled limit order to sell it at twice what you bought it for.
If you picked a good stock, at a good price, it should quickly reach your selling price. Your order will be filled, and you don't have to watch the stock at all. Just watch your account home page for sales (orders filled).
You don't get to adjust your selling to try to get an even higher price, this way, but, if you're doubling your money, who's complaining?
I've had problems placing orders for double or more the going price, but a little experimentation just now showed I can place such an order. Since you're placing a sell order as soon as you buy a stock, if you can't place an order at your target price, maybe you should place a sell order wherever you can, and look for, maybe, a more actively traded stock. (If you consistently can't place sell orders for double the current price, you need to find out what's going on. Call your broker.)
As you review charts, try to guess how long it will take for a stock to double. First, how long will it take to go down to a good price ... or is it already at a good price. Then, try to guess how long it will take to go up to double what you think is a good price. If you find yourself thinking "I feel like I can really tell," and "this one should double right away, but this other one will take a while to reach a good price," you're on your way!
You don't so much read charts as you listen to them. Use your gut.
Use limit orders. Use all or nothing good until canceled orders. Do this for both buying and selling. Pick a stock trading at a price you like, with more than 2x upward potential, as told by the chart. Use a good until canceled all or nothing limit order to buy it at the price you like. Then, place an all or nothing good until canceled limit order to sell it at twice what you bought it for.
If you picked a good stock, at a good price, it should quickly reach your selling price. Your order will be filled, and you don't have to watch the stock at all. Just watch your account home page for sales (orders filled).
You don't get to adjust your selling to try to get an even higher price, this way, but, if you're doubling your money, who's complaining?
I've had problems placing orders for double or more the going price, but a little experimentation just now showed I can place such an order. Since you're placing a sell order as soon as you buy a stock, if you can't place an order at your target price, maybe you should place a sell order wherever you can, and look for, maybe, a more actively traded stock. (If you consistently can't place sell orders for double the current price, you need to find out what's going on. Call your broker.)
As you review charts, try to guess how long it will take for a stock to double. First, how long will it take to go down to a good price ... or is it already at a good price. Then, try to guess how long it will take to go up to double what you think is a good price. If you find yourself thinking "I feel like I can really tell," and "this one should double right away, but this other one will take a while to reach a good price," you're on your way!
You don't so much read charts as you listen to them. Use your gut.
how to search for stocks
I use the Scottrade platform (you need an account), but there are other options. Yahoo!Finance is the one I've looked at most, but it's kind of limited. I wanted to give you some option to that. I searched on the term "stock screeners" (in Lycos). I tried the link for http://www.marketwatch.com/tools/stockresearch/screener/.
I asked for stocks trading between 11 and 11.1, but got nothing. I tried stocks between 11 and 12 and got a list. I started looking at the charts. Open the page in a new window by right clicking on the symbol (in the list) and choosing that option. Find the charts tab, and choose "advanced". Select a 1 decade time frame. (You should be looking at an OHLC chart.)
I think this, looking at stocks in a narrow price range, is the easiest and best way to find good trade. You aren't trying to use a simple tool, the scanner, to do the intricate job of analyzing the fundamentals, just to give you a list of stocks. One reason to choose a price range is to limit the length of the list, but there are reasons to choose one price range over another. I think the lower the price, the more potential there is for appreciation, but, on the other hand, at very low prices, buying and selling becomes trickier. Stocks trading around 10 look like a reasonable compromise.
I need to emphasize that I have no proof you can find good buys this way. I'm not a successful investor! I'm just someone who has stuck with it for a long time and thinks it's looking good. I'm getting really enthusiastic about the charts I'm turning up. This system is a new development for me - in a direction I like, simplifying things - and I really like what I'm seeing. I'm seeing, in the price history for lots of these stocks, big surges of appreciation. Now prices may be settling back to old lows, in which case they're pretty much buys, or they may still be up, in which case I expect them to settle back to old lows, at which point they will be great buys - so I think. A surge of appreciation means prices surged upwards for a period of time, maybe a year or more, or they surged upward and held at the new high prices for months. It took some kind of enthusiasm in the market to generate a move like that. Behind that kind of enthusiasm is some kind of interesting activity that a company is engaged in.
Prices will, most likely, fall, after an upward move. If you look at any reasonably extensive selection of stocks, I think you'll see them move up and down, say, by 200% on the upside, then down 50% again, over and over and over. A decline does not represent a failure at a company, I think, as a rule. It's just a wave, and waves follow one on another.
If there are repeated waves, that you can see in charts, your job is to buy near earlier lows. You can estimate where the next top will be from earlier tops, and sell in that area, or even below it, if you have a good profit. I think you will find this is reliable. What's not reliable is buying near cyclic tops, or even above them. Then you'll likely to see prices dip, or drop. Not good! (There are exceptions to this. Prices can shoot up from a cyclic top. But identifying situations like that takes more advanced analysis. This system is designed to be easy to understand, easy to apply. It's like we're fishers, and there are fishers who can find and capture great schools of fish, but we are just fishers dangling a line in the waters. Still, if we're smart about it, we can catch fish.)
I kind of like these charts at MarketWatch. Wow. Market Watch is quite a site. It just suggests, I think, the power of the stock market, that can support a huge site like this, seemingly without effort. It's the kind of thing that suggests to me we are much more likely to see a wave repeat than to see the stock expire without explanation.
I asked for stocks trading between 11 and 11.1, but got nothing. I tried stocks between 11 and 12 and got a list. I started looking at the charts. Open the page in a new window by right clicking on the symbol (in the list) and choosing that option. Find the charts tab, and choose "advanced". Select a 1 decade time frame. (You should be looking at an OHLC chart.)
I think this, looking at stocks in a narrow price range, is the easiest and best way to find good trade. You aren't trying to use a simple tool, the scanner, to do the intricate job of analyzing the fundamentals, just to give you a list of stocks. One reason to choose a price range is to limit the length of the list, but there are reasons to choose one price range over another. I think the lower the price, the more potential there is for appreciation, but, on the other hand, at very low prices, buying and selling becomes trickier. Stocks trading around 10 look like a reasonable compromise.
I need to emphasize that I have no proof you can find good buys this way. I'm not a successful investor! I'm just someone who has stuck with it for a long time and thinks it's looking good. I'm getting really enthusiastic about the charts I'm turning up. This system is a new development for me - in a direction I like, simplifying things - and I really like what I'm seeing. I'm seeing, in the price history for lots of these stocks, big surges of appreciation. Now prices may be settling back to old lows, in which case they're pretty much buys, or they may still be up, in which case I expect them to settle back to old lows, at which point they will be great buys - so I think. A surge of appreciation means prices surged upwards for a period of time, maybe a year or more, or they surged upward and held at the new high prices for months. It took some kind of enthusiasm in the market to generate a move like that. Behind that kind of enthusiasm is some kind of interesting activity that a company is engaged in.
Prices will, most likely, fall, after an upward move. If you look at any reasonably extensive selection of stocks, I think you'll see them move up and down, say, by 200% on the upside, then down 50% again, over and over and over. A decline does not represent a failure at a company, I think, as a rule. It's just a wave, and waves follow one on another.
If there are repeated waves, that you can see in charts, your job is to buy near earlier lows. You can estimate where the next top will be from earlier tops, and sell in that area, or even below it, if you have a good profit. I think you will find this is reliable. What's not reliable is buying near cyclic tops, or even above them. Then you'll likely to see prices dip, or drop. Not good! (There are exceptions to this. Prices can shoot up from a cyclic top. But identifying situations like that takes more advanced analysis. This system is designed to be easy to understand, easy to apply. It's like we're fishers, and there are fishers who can find and capture great schools of fish, but we are just fishers dangling a line in the waters. Still, if we're smart about it, we can catch fish.)
I kind of like these charts at MarketWatch. Wow. Market Watch is quite a site. It just suggests, I think, the power of the stock market, that can support a huge site like this, seemingly without effort. It's the kind of thing that suggests to me we are much more likely to see a wave repeat than to see the stock expire without explanation.
Sunday, November 20, 2011
how to trade the 10-10.1 list
The safest way to invest is to invest only a little (and make sure it's your own money). But then you need to achieve quite a substantial return to make real money. This essay is designed to allow you to legitimately seek a substantial return on a very small investment. There are, however, no guarantees, except the one that you won't lose more than you invest - if it's your own money you're investing. More on this later. This guarantee is provided by the markets, not by me, and it can only be enforced if you do your due diligence. It is up to you to know how much you have at risk.
Buying more expensive stocks has the advantage of probably making them easier to sell. They will tend to go to your target in an orderly way, and linger there for a longer period of time. If you don't watch them every day, but only check them from time to time, you are more likely to still be able to sell them.
This (see next post) is a wholly arbitrary selection of stocks, just designed to impartially limit the length of the list.
I looked at all the charts (5 year charts, which I can access relatively fast), and saw patterns that suggest historically good prices in most of them. If a stock is going to double, buying it at a good price vs buying it at a bad price is what makes the difference for you. I've listed what I think are good prices for all these stocks (except the few which you should ignore).
Buying at a specified price means using limit orders. A limit order tells the market "I will buy x number of shares at or below this price." Your order will only be filled if the market reaches that price. You're telling the market "I want to buy low, not high. When you're ready, give me this low price I like."
The alternative to limit orders is market orders. They're dangerous! You are telling the markets "just give me these shares, and bill me whatever you want for them." A market could just go ahead and do that.
Your mission is to double your money in a trade. All of the listed prices should make that possible with ease, unless otherwise noted. Some of them are listed with two prices. The higher price doubles your money, the lower one quadruples it. Why buy at two prices? Because the lower price might not be reached - and there's a pattern that suggests the higher price is a good price.
Those and one or two others are listed for four times appreciation.
Appreciation is measured from the recommended purchase price, not from the current price (except where the current price is the recommended price).
In a way, my mission here is to encourage you to buy cheap. Though some of the patterns suggest appreciation is likely from the current price, most of them suggest the stock is currently overpriced. Thus, if you are looking at that overpriced stock, I'm telling you to wait for a lower price, which I specify, if I can.
I'm specifying lower prices that I think will be achieved. The patterns tell us two things: what a low prices is, and what low price is likely to be achieved. You can then say that a particular stock is likely to reach a certain low price, and is likely to be cheap there, so it's worth watching that stock with an eye to buying it when it becomes cheap.
Time frame: I feel like the ups and downs in stocks average about a two year cycle. You might need to wait a year to get the cheap price, and then another year to sell for a double or for four x.
The hardest part is watching a list of stocks every day. The easiest way is probably to note target prices on the list, and then to look at just price quotes every day. I need to work on this, still.
There is absolutely no guarantee a price I've identified as being cheap will turn out to in fact be cheap. You risk losing any money you invest in stocks. Don't invest more than you can easily afford to lose. This system is not ideal for very small accounts. Let's see, 4 stocks are listed as good now. If you buy $100 of each, you might make good money, and it'll cost you $450. If that's all you want to invest (in this system) ... well, it's OK. Just wait for them to go to your targets, sell them, and look for new cheap ones to buy. But, again, there's no guarantee of any kind. You could loose all of that $450.
If I just tell you what stocks are cheap at what price, what can you do without me? At least study the charts I've identified as being cheap, now, and see if they speak to you. Also, study the low prices I've identified, and see if you can get a sense of how I identified them. Then study the target prices I've identified the same way. Then you can go to any list of stocks and look for cheap prices and attractive targets.
If you are reading these posts after November 20, 2011, remember, when looking at charts, that the recommendations were made on that date. You should be able to see charts for most of these stocks using free charting, such as Yahoo!Finance (or search for "stock charts" or "free stock charts." If you want to investigate cheaper stocks, which I recommend, you might find the data at Yahoo!Finance is limited. I use Scottrade for my charting. Their charts are quite complete. Of course, you need to have an account. (Some of the non Yahoo free charting sites might have better data.)
Buying more expensive stocks has the advantage of probably making them easier to sell. They will tend to go to your target in an orderly way, and linger there for a longer period of time. If you don't watch them every day, but only check them from time to time, you are more likely to still be able to sell them.
This (see next post) is a wholly arbitrary selection of stocks, just designed to impartially limit the length of the list.
I looked at all the charts (5 year charts, which I can access relatively fast), and saw patterns that suggest historically good prices in most of them. If a stock is going to double, buying it at a good price vs buying it at a bad price is what makes the difference for you. I've listed what I think are good prices for all these stocks (except the few which you should ignore).
Buying at a specified price means using limit orders. A limit order tells the market "I will buy x number of shares at or below this price." Your order will only be filled if the market reaches that price. You're telling the market "I want to buy low, not high. When you're ready, give me this low price I like."
The alternative to limit orders is market orders. They're dangerous! You are telling the markets "just give me these shares, and bill me whatever you want for them." A market could just go ahead and do that.
Your mission is to double your money in a trade. All of the listed prices should make that possible with ease, unless otherwise noted. Some of them are listed with two prices. The higher price doubles your money, the lower one quadruples it. Why buy at two prices? Because the lower price might not be reached - and there's a pattern that suggests the higher price is a good price.
Those and one or two others are listed for four times appreciation.
Appreciation is measured from the recommended purchase price, not from the current price (except where the current price is the recommended price).
In a way, my mission here is to encourage you to buy cheap. Though some of the patterns suggest appreciation is likely from the current price, most of them suggest the stock is currently overpriced. Thus, if you are looking at that overpriced stock, I'm telling you to wait for a lower price, which I specify, if I can.
I'm specifying lower prices that I think will be achieved. The patterns tell us two things: what a low prices is, and what low price is likely to be achieved. You can then say that a particular stock is likely to reach a certain low price, and is likely to be cheap there, so it's worth watching that stock with an eye to buying it when it becomes cheap.
Time frame: I feel like the ups and downs in stocks average about a two year cycle. You might need to wait a year to get the cheap price, and then another year to sell for a double or for four x.
The hardest part is watching a list of stocks every day. The easiest way is probably to note target prices on the list, and then to look at just price quotes every day. I need to work on this, still.
There is absolutely no guarantee a price I've identified as being cheap will turn out to in fact be cheap. You risk losing any money you invest in stocks. Don't invest more than you can easily afford to lose. This system is not ideal for very small accounts. Let's see, 4 stocks are listed as good now. If you buy $100 of each, you might make good money, and it'll cost you $450. If that's all you want to invest (in this system) ... well, it's OK. Just wait for them to go to your targets, sell them, and look for new cheap ones to buy. But, again, there's no guarantee of any kind. You could loose all of that $450.
If I just tell you what stocks are cheap at what price, what can you do without me? At least study the charts I've identified as being cheap, now, and see if they speak to you. Also, study the low prices I've identified, and see if you can get a sense of how I identified them. Then study the target prices I've identified the same way. Then you can go to any list of stocks and look for cheap prices and attractive targets.
If you are reading these posts after November 20, 2011, remember, when looking at charts, that the recommendations were made on that date. You should be able to see charts for most of these stocks using free charting, such as Yahoo!Finance (or search for "stock charts" or "free stock charts." If you want to investigate cheaper stocks, which I recommend, you might find the data at Yahoo!Finance is limited. I use Scottrade for my charting. Their charts are quite complete. Of course, you need to have an account. (Some of the non Yahoo free charting sites might have better data.)
15 stocks between 10 and 10.1
acazf good at 6
allb good now
atrc good at 5, great at 2.50
brks good at 5
eroc good at 5, great at 2.50
gcrsf
itocf good at 5
maksy good at 6, great at 3
mcrl good at 6
pamc it's up something like 100x in the last 3 months ... but there's very little data
pgh good at 5
rbgpy ok at 7
rld good now
rwt good now (for 6x appreciation)
stc good now for 4x
tast very good at 2.5 (4x)
vnet ok now
vsbn ok at 8
allb good now
atrc good at 5, great at 2.50
brks good at 5
eroc good at 5, great at 2.50
gcrsf
itocf good at 5
maksy good at 6, great at 3
mcrl good at 6
pamc it's up something like 100x in the last 3 months ... but there's very little data
pgh good at 5
rbgpy ok at 7
rld good now
rwt good now (for 6x appreciation)
stc good now for 4x
tast very good at 2.5 (4x)
vnet ok now
vsbn ok at 8
conclusions
I got tired of looking at the charts - 15 charts of stocks trading at $10 - very soon. Boring!
To speed things up, I dreamed up a scan that might illustrate my point. How many stocks are trading today over $10? 3941. How many of these are up 2x in 52 weeks? 14. 1 in 281 stocks trading at $10 are up 2x in the last year.
It's a little hard to interpret these numbers, but they seem to suggest the following: if you bought every stock you could at $5 a year ago, and during the year, you would now have 14 that doubled, out of 4000. Not a great result.
By the way, if I run the scan to tell me how many of the $10 stocks today are down by more than 50%, I get 3573. Stocks you bought at $20 this year did terrible. (This very unbalanced number suggests stocks trading at $10 might be a good buy right now.)(It is also a very surprising result ... and yet, it seemingly confirms what I suspected: that high price stocks are not a good buy.
Is a $10 stock high priced? Well, how many stocks are trading below $10? 9756. 1/3 of all stocks are trading above $10, and 2/3 are trading below $10. A stock trading above $10 is more expensive than 2/3 or the stocks traded. By that measure, yes, it's expensive.
Now what happens if we test for stocks under $10 that have doubled during the year. 424 of them. That's 1/23, which is ........ 10x better than than stocks trading above $10. According to this measure, your odds of winning (getting a double) are ten times greater with cheap stocks than they are with expensive ones.
These measures are a little broad. I want to experiment with a slightly different approach.
Among the 220 stocks trading between 9 and 10 today, none have doubled.
Among the 224 stocks trading between 8 and 9 today, 3 have doubled.
Among the 273 stocks trading between 7 and 8 today, none have doubled.
Among the 263 stocks trading between 6 and 7 today, 2 have doubled.
... ok ... I don't like this setup. Let me start again.
Among the 1321 stocks trading between 5 and 10, 12 have doubled.
Among the 945 stocks trading between 2.5 and 5, 23 have doubled.
Among the 826 stocks trading between 1.25 and 2.5, 25 have doubled.
Among the 771 stocks trading between .625 and 1.25, 47 have doubled.
Among the 783 stocks trading between .3125 and .625, 53 have doubled.
Among the 873 stocks trading between .15625 and .3125, 41 have doubled.
Among the 753 stocks trading between .08 and .16, 25 have doubled.
Among the 631 stocks trading between .04 and .08, 40 have doubled.
Among the 410 stocks trading between .02 and .04, 24 have doubled.
Among the 251 stocks trading between .01 and .02, 22 have doubled.
Among the 250 stocks trading between .005 and .01, 22 have doubled.
Among the 228 stocks trading between .0025 and .005, 16 have doubled.
Among the 271 stocks trading between .00125 and .0025, 18 have doubled.
Among the 263 stocks trading between .0006 and .00125, 14 have doubled.
Among the 102 stocks trading between .0003 and .0006, 2 have doubled.
Among the 67 stocks trading between .00015 and .0003, none have doubled.
not entirely satisfactory. let me try again.
Among the 344 stocks trading under .0001, ... oh, there are no such stocks.
Among the 650 stocks trading under .001, 3 have doubled.
Among the 918 stocks trading between .001 and .01, 69 have doubled.
OK, this is not exactly what I'd hoped for, though it does suggest that cheap stocks on the whole are a better bet than expensive stocks. I don't think these results are representative, but I'm not sure how to prove that.
To speed things up, I dreamed up a scan that might illustrate my point. How many stocks are trading today over $10? 3941. How many of these are up 2x in 52 weeks? 14. 1 in 281 stocks trading at $10 are up 2x in the last year.
It's a little hard to interpret these numbers, but they seem to suggest the following: if you bought every stock you could at $5 a year ago, and during the year, you would now have 14 that doubled, out of 4000. Not a great result.
By the way, if I run the scan to tell me how many of the $10 stocks today are down by more than 50%, I get 3573. Stocks you bought at $20 this year did terrible. (This very unbalanced number suggests stocks trading at $10 might be a good buy right now.)(It is also a very surprising result ... and yet, it seemingly confirms what I suspected: that high price stocks are not a good buy.
Is a $10 stock high priced? Well, how many stocks are trading below $10? 9756. 1/3 of all stocks are trading above $10, and 2/3 are trading below $10. A stock trading above $10 is more expensive than 2/3 or the stocks traded. By that measure, yes, it's expensive.
Now what happens if we test for stocks under $10 that have doubled during the year. 424 of them. That's 1/23, which is ........ 10x better than than stocks trading above $10. According to this measure, your odds of winning (getting a double) are ten times greater with cheap stocks than they are with expensive ones.
These measures are a little broad. I want to experiment with a slightly different approach.
Among the 220 stocks trading between 9 and 10 today, none have doubled.
Among the 224 stocks trading between 8 and 9 today, 3 have doubled.
Among the 273 stocks trading between 7 and 8 today, none have doubled.
Among the 263 stocks trading between 6 and 7 today, 2 have doubled.
... ok ... I don't like this setup. Let me start again.
Among the 1321 stocks trading between 5 and 10, 12 have doubled.
Among the 945 stocks trading between 2.5 and 5, 23 have doubled.
Among the 826 stocks trading between 1.25 and 2.5, 25 have doubled.
Among the 771 stocks trading between .625 and 1.25, 47 have doubled.
Among the 783 stocks trading between .3125 and .625, 53 have doubled.
Among the 873 stocks trading between .15625 and .3125, 41 have doubled.
Among the 753 stocks trading between .08 and .16, 25 have doubled.
Among the 631 stocks trading between .04 and .08, 40 have doubled.
Among the 410 stocks trading between .02 and .04, 24 have doubled.
Among the 251 stocks trading between .01 and .02, 22 have doubled.
Among the 250 stocks trading between .005 and .01, 22 have doubled.
Among the 228 stocks trading between .0025 and .005, 16 have doubled.
Among the 271 stocks trading between .00125 and .0025, 18 have doubled.
Among the 263 stocks trading between .0006 and .00125, 14 have doubled.
Among the 102 stocks trading between .0003 and .0006, 2 have doubled.
Among the 67 stocks trading between .00015 and .0003, none have doubled.
not entirely satisfactory. let me try again.
Among the 344 stocks trading under .0001, ... oh, there are no such stocks.
Among the 650 stocks trading under .001, 3 have doubled.
Among the 918 stocks trading between .001 and .01, 69 have doubled.
OK, this is not exactly what I'd hoped for, though it does suggest that cheap stocks on the whole are a better bet than expensive stocks. I don't think these results are representative, but I'm not sure how to prove that.
research
here's a list of 15 stocks trading between 10 and 10.1 at this writing
acazf
brks
eroc
gcrsf
itocf cloud
maksy
mcrl
nebs
pamc
pgh
rbgpy
rld
rwt
stc
vsbn
acazf
brks
eroc
gcrsf
itocf cloud
maksy
mcrl
nebs
pamc
pgh
rbgpy
rld
rwt
stc
vsbn
Saturday, November 19, 2011
here it is, the list
stocks between .008 and .009 as this is written:
avmc target:25, activelowsemiline, ordering 100@.0081 guc aon, estimated $7.8141
bgem target:.6, heel!, ordering 400@.0025 guc aon $8.005
blln target:3, activespikelowup, ordering 200@.004 $7.804 and 400 at .002 $7.804, guc, aon
chif, target:200 vthinlow, ordering 200@.0061 $8.2261 guc aon
cwltq, target:160 vthinlowup, ordering 400@.0021 $7.8442 guc aon
goyl
mwwc
pmso
saei
sgog
siii
tuic
vmcs
vspc
wbsi
15 stocks
avmc target:25, activelowsemiline, ordering 100@.0081 guc aon, estimated $7.8141
bgem target:.6, heel!, ordering 400@.0025 guc aon $8.005
blln target:3, activespikelowup, ordering 200@.004 $7.804 and 400 at .002 $7.804, guc, aon
chif, target:200 vthinlow, ordering 200@.0061 $8.2261 guc aon
cwltq, target:160 vthinlowup, ordering 400@.0021 $7.8442 guc aon
goyl
mwwc
pmso
saei
sgog
siii
tuic
vmcs
vspc
wbsi
15 stocks
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