The truth about getting started in the stock market

Getting started in the stock market is a hard thing for most people. My first two investments in the stock market went broke. I was drawn to a strong company with state of the art technology, and a cheap share price C.A.I. wireless. The company ended up doing very well and merging with a larger player in the market a few years latter; but, not before the stock I purchased was declared worthless. The second stock I invested in was Caldor a now out of business retailer. I invested because it was a penny stock and I had good memories of the company from when I was a little kid. Look to companies that can give your kids good memories; not, companies that gave you good memories. The world is ever changing and emerging opportunities can be found. Lesson to be learned is avoid penny stocks most of the time. Most penny stocks lose value and end up at zero. Hard fact to swallow; but, the truth. Don’t try to make money right away or too much money. Price of stock is not important. If you find a top penny stock or I find one I will be happy to point it out. I don’t know of a single penny stock worth owning currently. Don’t focus on the cheapest stocks. A stock from 50 to 100 is double your money. As a stock going from 10 cents to 20 cents is double your money. However, the risks are totally different. A stock with a fifty dollar share price is very unlikely to go to 0. A stock with a 10 cent share price has a good chance of reaching 0 at some point in the future even if the technology is top notch. Investors in bonds will pressure the company by both short selling the common stock, and pressuring management to cancel the common stock to preserve the money of bondholders. Money, good judgement and hard work are all necessary to making more money. Good judgement, financial resources, and experience can only be accumulated with hard work and time. I have included links to helpful websited on the website in the blog role to keep you on top of market events. Be weary of fraud in small stocks. You can create a portfolio of stocks to watch at yahoo finance. Invest for fun first. Invest with no money on line. Develop your understanding of the market and inbiassed learning is more effective when you have no money invested. Stay positive! Some small stocks will publish lots of overly optimistic news for months, and then disappear leaving trusting investors broke. Stocks go up when people are buying and down when they are selling. It is too easy for a large investor to manipulate the small stocks. So find mid cap stocks going up if you must triple your money and expand your time frame for this to happen to longer periods of time. After a few years of investing you can invest in options, go to work for a company like Bright trading or invest in the futures market to get more leverage on your money. Without experience, education, hard work, and good luck you will lose money. The market rules may seem set up to defeat the new investor; but, they actually serve to protect you from being overly aggressive. Don’t try to be the first investor to find a stock. Look for stocks that have earnings and revenue growth going forward. Look to stocks going higher in price, and stocks that experienced people are talking about. Try to enter top stocks on a pull back. Set up a stop loss price. A price you will get out if the stock moves lower. Carefully come up with a plan on how often you are going to trade, and how many stocks you are going to own. The trend following system I created can be used to start out or to come up with your own ideas on investing or trade. Talking to a financial planner may be appropriate if you want extra help and can afford it. Don’t try to force things. Wait patiently to get in the right stocks at the right prices. Read any helpful books you can find. A book on technical analysis will be needed. A book on fundamental analysis would be helpful. The more books you read the more knowledge you will pick up. Stocks generally follow the economic cycle. We are at one of two places at the beginning of a bear market or end of a bull market. Tough time to make long or short term investments. You will need to be patient and look to find an industry that is going to be able to meet its earnings in any environment. Draw back of a margin account is you pay interest that can be hard to overcome in a challenging market. The benefit is you can look to short companies that you believe may be weak going forward. You will need two thousand dollars to open a margin account. Find a brokerage company that is well known, affordable, and meets your needs. I use Scottrade Securities.

January 20, 2008 - Posted by topstockblog | Uncategorized | bear market, blog, financial, first investment, getting started in stocks, investing, learning to invest, margin account, money, new investor, penny stocks, profits, stocks to buy, stocks to short 2008, trading, trading systems, trend following | No Comments Yet

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Topstockblog play book.

1. Use the 50 DMVA (Day Moving Average) to gain insight. Be aware of how different Moving averages like the 200 day moving average influences a stocks. Consolidation takes time and averages influence direction. The 50 DMVA shows when a lot of money moves into or out of a stock. Look for stocks ready to break out of consolidating patterns. Look for support and resistance levels. look at over sold and over bought indicators (VIX) (MACD) Wait for blood in the water to make trades. Do not buy over bought stocks. Buy over sold stocks.

2. Work with liquid and solid stocks only. Hard enough to figure out what a liquid stock will do, let alone one that is controlled by the action of a few people. Focus on getting price improvement for all trades to slightly improve trading results. Look at a one day time frame to likely best price of the day to get the best price. Look at what might be the best price of the week. Look to what could hold the stock up. i.e Look to get in at or near the low of the day or week. Look to trade with the likely direction of the market.

3. Use a set unit size. Will help ensure a long run positive return. Overly investing will significantly increase the chance you eventually go broke. No matter how much money you accumulate along the ride.

4. Look at the potential return on the trade versus the potential loss on the trade. Look at the likely hood the trade will work, and what I expect to gain from the trade. A trade that looks like I could earn double my money or better while have a projected likely loss of 1/3 or less is a trade with a positive expectation if it is successful 50% of the time.

6. Focus on a set or refined list of stocks to better understand how a stock may move in the future to gain an advantage

7. Always be careful. Good luck and bad luck are a part of trading markets. Trading has and will always be difficult.

8. Understanding myself is important to deal with mistakes that may be predictable in nature. Looking to where I may falter. My strength lies in my hard work ethic. My weaknesses that can side track me are aggression, emotional instability, drinking, negative attitude, lack of financial resources, and lack of patience.

9. Be patient, and follow my rules. I found it hard to diversify and not add to losing positions. I find it hard to keep my money in cash. I have found taking money out on a regular basis helpful to finding balance. Keep some money in cash always, go over my rules repeatedly to stay within the rules. Do not add more than once to a losing position.

10. Work a schedule of Monday to Friday 9:00-4 and 6-8. I found it important to set boundaries for hours to work and/or worry about the market.

11. Use a two step buying process. Averaging down trading approach may be useful. A two step exit approach may also be effective. Both to lock in profits and let profits go higher

12. Do not trade options expiring the same week.

13. Be aware how progressive an idea may be or how it may be of little importance.

14. Look at both sides of the trade.

15. Stay focused on the stock market. Don’t confuse political ideals with where a stock is going or get overly focussed on what you think should happen. Focus on what is likely to happen.

16. Take time out when I am emotionally drained .

17. Stocks tend to move the opposite of options volume. i.e. a lots of put buying in OIH compared to call buying often indicates a hedge by real buyers and dumb money guessing wrong in my experience.

18. Use indexes that move with your stock; despite fundamentals stocks will often trade directionally with an underlying index. i.e. XOM or RIG will trade with the OIH index.

20. Be very selective about trades, takes to try to find profitable opportunities. Call and Put writers are very intelligent and often time ideas, news is already priced into the price premium of the option.

21. Go over actual results of trading. Look improve future trading performance and learn from the past.

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Updated 4/13/09 -- AAPL, AUY, CALM ,CMED, FEED, GFA, IBM, MTW, PBR, UPL, VAR, YGE. YGE is a solar stock of china - management bought shares, MTW - is falling apart, recently bad aquistion food service products- demand is low; but, good risk reward. ***Took out Crox, added FEED - China food demand growth strory, and VAR - top of line cancer treatment equipment. The market volatility is declining, uptick rule if reinstated should be supportive to stability, Retirement costs, recession, greed, environmental damage, war, theft, and debt obligations have the potential to bankrupt communities in worst case scenarios. (Added greed, war, and theft to list of world problems. Removed Energy shortage.) Innovation, sacrifice, leadership, peace, hope, technology, charity, and security are helping. Seasonal and long term trends in the market always seem to play a big role. I like AAPL as a long term value to the world, and a positive image of American Technology. ****Entertainment purposes***
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last years trade ideas 12/2008

GOOG is gaining market share; but, aproaching a size in which growth rates should decline. Missed earnings last quarter. Has new ideas in pipeline. RTH rising when it becomes over sold, and declining over bought. Increasing occupancy rates, and a recession can not be good. UNH less attractive over bought, and better value over sold. OIH looks range bound and tradable. Oil is probably over sold currently around $40 a barrel. QQQQ looks like a good short until this becomes over done. Monetary policy is supportive of stock prices, and home prices. Entertainment purposes,
Stocks looking tradeable

My watch list updated 4/13/09, YGE - under $10* FEED - under $3 * AAPL - under $125* MGM - under $7* GV - under .50 cents - huricaine play Entertainment purposes,

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The truth about getting started in the stock market

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Social and Environmental websites

Stock Market Websites

U.S. Government Resources

Bullish Stocks

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last years trade ideas 12/2008

Stocks looking tradeable

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