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.
Monday, November 21, 2011
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.)
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