'I've done all the dumb things' - Suggestions?

[Panacea]

Example.

buy the stock at $1
At 1.20 sell the initial stock cost outlay.
Keep the profit running.
The stock is now a fee trade.
to lose all the profit it would have to be delisted.( go broke).

Thanks tech/a, that makes sense. I suppose you would need a reasonably large position size, or a very strong gain for this to be worthwhile? (Otherwise you would be left with a very small parcel of stock).

 

[farout]

I think if you want an honest intelligent view/opinion you need to provide all the info. I am certainly not prepared to say 'hold' or 'sell' without knowing which company you are referring to. There are a lot of quality stocks out there that have been oversold. Perhaps yours is one of them and you may just be sitting on a long-term winner.

 

[Panacea]

I think if you want an honest intelligent view/opinion you need to provide all the info. I am certainly not prepared to say 'hold' or 'sell' without knowing which company you are referring to. There are a lot of quality stocks out there that have been oversold. Perhaps yours is one of them and you may just be sitting on a long-term winner.

Your right. I'm not trying to be evasive though - it's just that mentioning a stock (ELK for example ) would likely see this thread become focused on the stock itself, and not on the general strategy side of things.

 

[tech/a]

It really is simple.

Dont hold losses.
Only hold winners.

Most do the exact opposite.

Rather than put all your eggs in one oil well spread your portfolio.
LEARN how to POSITION size.
Read and learn Fixed Fractional position sizing.

Know when your wrong and get out,make sure your positionsizing is such that when clearly your wrong taking the loss wont have you thinking
GOD I dont want to realise this loss!!

Build your fortune over years.
Rather than attempting to make it in 3 mths.
Trading this way almost guarentees ruin in 3 mths the exact opposite to what you wish to achieve.

Learn how to read a chart
You would never have gone long on ELK had you known what to look for.
It was as plain as daylight even software picked it up!

While its to late to undo this error there is opportunity to mitigate it.(recover some losses.)
ELK in the short term appears to be over the worst in my view (Not advice just an observation) Fridays bar shows some strength but to early to say how recovery could go. The next few days will give a hint I'm sure.

 

[peter2]

farout, you should know better. Nobody should be giving specific financial advice without a license. (My apologies if you do have license.)

-35% / 3 days with low volume = most probably a low priced "gunna" stock with unreliable FA.

 

[tech/a]

in my view (Not advice just an observation)

Which part of the above didnt you understand?

 

[Joe Blow]

I am certainly not prepared to say 'hold' or 'sell' without knowing which company you are referring to.

Nobody in this thread should be suggesting to anyone to "buy", "sell" or "hold" anything. Doing so is illegal and I will immediately remove any posts that suggest anything along those lines.

The only responsible way for people to respond in a thread such as this is to outline possible options, not to recommend or advise anything.

 

[Nyden]

Example.

buy the stock at $1
At 1.20 sell the initial stock cost outlay.
Keep the profit running.
The stock is now a fee trade.
to lose all the profit it would have to be delisted.( go broke).

Yes, but tech - this hardly works for someone that has very little capital.
Let's say someone has 5k to invest; they spread that over 5 stocks ... 1k per stock. A 20% gain is fairly substantial, and this would involve holding (at risk) for a fairly long period of time ... now, let's say it does eventually hit that 20% mark, after transaction fees ... that's only $130 worth of free-carried stock! Worthless; after further transaction fees, wouldn't even be worth selling.


Unfortunately, the other problem is that people with very little capital ... are more emotionally attached to the money they have. I've made this mistake myself in the past, sold out near-bottom for some hefty losses for fear of losing what I had. I believe if you don't have a lot of capital, you shouldn't be in the market ... period. Everyone says a portfolio should be diversified (across more sectors than stocks alone), should this not apply to even a very small portfolio?

Stop-losses (especially in the current market environment) can also be quite damaging to a small-holding; all that automatic selling, and re-buying can very quickly dissolve a small amount of money.

 

[pattyp]

Hi Panacea,

U've had some good advice already... But I thought Id share my early experiences 2twocents) and some comments... Take it or leave it

In my first 2-yrs I lost 90% of my capital twice... LoL. Both times were complete wipe-outs in under 3hrs using margin loans... So greedy, so nieve, So Stupid... I just kept averaging down into oblivion...

When I first started trading, an investor I knew said to me...

"Be prepared for pain... This is hard... Most give up... The ones that don't, the ones that insist on criticising themselves, bettering themselves, learning everything about the markets (TA/FA/etc) will take losses, but more importantly, live life with HUGE wins and compounding wealth"

...eh... It was along those lines anyway. He was a smart guy... But he was also a doctor and therefore could afford to lose his money LoL.

Anyway...

1. Realise the loss (which may mean selling near the bottom as the stock is now approaching a previous support level).

If technical trading, Stop-loss hit - Sell out and move on... Thats what I do.

2. Average down (this seems like throwing good money after bad).

I regularly average down... But ONLY on Fundamental Trades... Corps. I'm so confident in, and know so well, that I see a drop in price as a golden opportunity to increase holding. I never avg down TA trades... Thats killed me more then anything else

3. Put the shares in the bottom drawer (where bad stocks go to die).

IMO - Bottom drawer isn't for stocks to go to die... If my stock is dying (eg. Holds no more value in my opinion) I sell and re-allocate the capital. I do however keep highly speculative stocks that are explorers/new tech. in my bottom drawer... Mainly because they are small holdings, long lead time before expected return... Dont want to think about them day-to-day.

Good Luck Dude...

Pat

 

[>Apocalypto<]

Yes, but tech - this hardly works for someone that has very little capital.
Let's say someone has 5k to invest; they spread that over 5 stocks ... 1k per stock. A 20% gain is fairly substantial, and this would involve holding (at risk) for a fairly long period of time ... now, let's say it does eventually hit that 20% mark, after transaction fees ... that's only $130 worth of free-carried stock! Worthless; after further transaction fees, wouldn't even be worth selling.


Unfortunately, the other problem is that people with very little capital ... are more emotionally attached to the money they have. I've made this mistake myself in the past, sold out near-bottom for some hefty losses for fear of losing what I had. I believe if you don't have a lot of capital, you shouldn't be in the market ... period. Everyone says a portfolio should be diversified (across more sectors than stocks alone), should this not apply to even a very small portfolio?

Stop-losses (especially in the current market environment) can also be quite damaging to a small-holding; all that automatic selling, and re-buying can very quickly dissolve a small amount of money.

Good post and good points. But where's the answer? I would be even more confused after reading that and looking for a solution.

Panacea

Me personally I never place a trade without a stop loss. Now I do trade short term on FX 30min and 1hr time frames. But regardless of the time frame I always know my exit price. No matter how good you r at trading or how good your frame of mind or your analysis you can never you exactly what the market will do next. Due to that fact I put survival first. All my stops are worked out to a % of my account.

If I was long term I would also place stops, but they would be much wider then I use now to allow for natural movements. But like Tech has said u have to cut your losers and ride your winners!

 

[Nyden]

Good post and good points. But where's the answer? I would be even more confused after reading that and looking for a solution.

Panacea

Me personally I never place a trade without a stop loss. Now I do trade short term on FX 30min and 1hr time frames. But regardless of the time frame I always know my exit price. No matter how good you r at trading or how good your frame of mind or your analysis you can never you exactly what the market will do next. Due to that fact I put survival first. All my stops are worked out to a % of my account.

If I was long term I would also place stops, but they would be much wider then I use now to allow for natural movements. But like Tech has said u have to cut your losers and ride your winners!

Well, that's because there is no easy answer here. He / she has stated that they have very little capital, have made some mistakes, & realistically - there is nothing that can be done to "fix" the situation, only to prevent further losses I guess.

There is an answer in there though, if you read carefully. I did state that someone who has very little capital ... shouldn't be in the market (in my opinion). In the current market environment, unless you're really long-term, or really know what you're doing ... you shouldn't be in it.

No one can offer actual suggestions, only ideas - so, I shall pose this question to you Panacea - would you buy the stocks you currently hold right now? If you hadn't bought them already, and were looking at them right now, would you buy them? That is essentially what you're doing by holding them ... re-buying them.

If you're no longer confident in the company ... to the point where you would no longer comfortably invest in them, then you should really change something.

 

[>Apocalypto<]

Well, that's because there is no easy answer here. He / she has stated that they have very little capital, have made some mistakes, & realistically - there is nothing that can be done to "fix" the situation, only to prevent further losses I guess.

There is an answer in there though, if you read carefully. I did state that someone who has very little capital ... shouldn't be in the market (in my opinion). In the current market environment, unless you're really long-term, or really know what you're doing ... you shouldn't be in it.

No one can offer actual suggestions, only ideas - so, I shall pose this question to you Panacea - would you buy the stocks you currently hold right now? If you hadn't bought them already, and were looking at them right now, would you buy them? That is essentially what you're doing by holding them ... re-buying them.

If you're no longer confident in the company ... to the point where you would no longer comfortably invest in them, then you should really change something.

Agree and disagree on a aspect mate,

Again great post.

I personally feel the best way to become a better trader once starting out is to go live but do it in a controlled way. If you start a account with a tiny amount of money and get used to trading live this helps develop the mental skills u need. The main skill is it's ok to lose and it's ok to be wrong as long as you are risking something that u can afford to lose.

That is the big one. Can a new trader have the discipline not to get greedy and lose it. That comes down to the person I guess. I have found demo trading serves it purpose in testing new ideas at principal level but till u go live you really won't know exactly how it will go. Look I have just touched on the mental aspect, really that requires a whole new thread.

Nyden again thanks for keeping constructive

 

[refined silver]

I agree, there has been some good advice already, especially noika and peter2. IMO you first need to know why you bought the stock.

If on TA reasons, you better have a stop and you better sell on TA reasons. If for Fundamental reasons, a decline means you better review all the fundamental reasons you bought, check if you missed some factor, or has something new developed which changes the fundamentals of why you bought. If so may be time to sell. If not, and your analysis was correct, it may be time to hold or even buy more.

Secondly you need a good idea of the volatility of the instrument you are trading. For some shares 10% is a huge move and for others, 20% in a day is quite normal.

Thirdly, you need to understand what sort of instrument you are buying. Strategies that work with say small illiquid shares, are very different to strategies for blue chip shares, which are very different from strategies for options/futures etc. Check that the advice/books etc you are following is appropriate for what you are buying, eg don't use advice on trading FX for buying small shares. They are totally different animals.

 

[Panacea]

Hi guys. Thanks for the replies - there are some really constructive suggestions here. Obviously the issue i've raised is something many people have come across before.

I think i'll set a stop a couple of ticks below Fridays close. This will contain any further damage, while allowing me to look for a better exit if one presents itself.

>Apocalypto<, I agree with your take on small traders / investers being in the market. If i'm willing to cop the cost of brokerage as being part of the learning process, why not make the occasional small trade to learn the ropes? Who knows, I may be able to slowly grow my capital while learning 'hands on'.

Cheers.

 

[>Apocalypto<]

Hi guys. Thanks for the replies - there are some really constructive suggestions here. Obviously the issue i've raised is something many people have come across before.

I think i'll set a stop a couple of ticks below Fridays close. This will contain any further damage, while allowing me to look for a better exit if one presents itself.

>Apocalypto<, I agree with your take on small traders / investers being in the market. If i'm willing to cop the cost of brokerage as being part of the learning process, why not make the occasional small trade to learn the ropes? Who knows, I may be able to slowly grow my capital while learning 'hands on'.

Cheers.

Panacea.

Learning to trade is a personal challenge different for each and every one of us. You will see and pick things up that you prefer. Doing dumb things is part of learning. there is no real right way to trade all the points made offer something. The only right way is the way that makes u consistently profitable!

But me personally I pity people that relay on Guru's to tell them what to do. Fancy starting to trade only to be reliant in a way to a report. This is my opinion and if u use reports to trade that's your thing don't argue cuz I will never change my view.

The mental aspect is very important as much as your edge and your plan. I never really realized this until recently. If I can advise you on anything then I advise u read Trading in the zone by Mark Douglas. but I will leave that for u to decide.

Cheers
Joseph

 

[nioka]

nioka,

Newbie question... what do you mean by trading stocks until they are "free-carried"?

An example. Based on investing multiples of $1000
Buy $1000 worth of stock "A" @ 20c/share = 5000 shares.
If price rises to 30c .Sell you have $1,460 after brokerage.
Place order to buy back at 25c.
You buy 5450 shares.
If price rises again to 30c, sell and you have $1630.so you then place an order in for 6520 shares at 25c. You buy 6520 shares.
After a few trades you soon have $2,000 worth of shares. You sell half and the rest are "free carried"
Sounds tedious and slow but it isn't. Sometimes it is possible to trade two or three times a week sometimes daily. I've done it with a few stocks so far this year.
Then there is cross trading.
I cross traded TAS and TASO. When the options got to one third of the share price I sold shares and bought options. When I could buy one share for two options I went back to shares. Not exactly in those proportions but close). Each time creaming off a little capital until they owe me nothing.
I cross traded ADI and AUT. (they have similar interests in an oil well.)
Any time I saw a difference in the price, after taking into account their relative value I would sell one and buy the other, creaming off a little until I had back my original investment. Lately I have just been increasing my numbers held with each trade.
Plenty of stocks rise and fall 10% or more in a day you just have to have an order in or be ready to jump the queue with your order. I only trade in stocks I am prepared to hold long term if the trade doesn't eventuate.
Sometimes it is opportunistic and takes place over a year or more. A stock may have been bought at a low price and goes up and up. There is a lull and so you sell some,the price falls so you buy a few more than you sold. You build up numbers and there is a point where you can say I'll free carry some and cash the rest.

 

[So_Cynical]

Three days later and i'm sitting on a 35% paper loss.

I am not too worried about the financial cost as it's money I can afford to lose and I expect to take a few beatings along the way

1 of my holdings, had a bad ann a couple of weeks ago and fell 30% in a day, its now
back to where it was..so if i had hit the panic button that day id be really pissed now.

Like u say its money u can afford to lose...learn from your mistakes, why did XYZ fall
35% in a couple of days...what didn't u see coming?

 

[Panacea]

what didn't u see coming?

'XYZ' is a speculative oil stock and an announcement was badly received by the market.

Good news today, though. 17% increase on strong volume, so I may get out without too much damage.

 

[SilverDollar]

I understand the concept of free trade but think its a rubbish one personally. Why

If you have $1 worth of stock and it raises to $1.20 why sell $1 worth...

My options would be..

(A) Sell the lot because you've realized the expected gains and the reason you brought are now fulfilled, or the reason for buying is no longer relevant.

(B) Keep them all as its got to $1.20 but your reason buying is still strong and you think its got some further growth up the sleeve.

If the stock went from $1 to $2 I would apply the above or (because of the massive gains) sell some to re-balance my portfolio.

Just my opinion.

This is my approach. Others have different ones.

 

[roland]

I understand the concept of free trade but think its a rubbish one personally. Why

If you have $1 worth of stock and it raises to $1.20 why sell $1 worth...

My options would be..

(A) Sell the lot because you've realized the expected gains and the reason you brought are now fulfilled, or the reason for buying is no longer relevant.

(B) Keep them all as its got to $1.20 but your reason buying is still strong and you think its got some further growth up the sleeve.

If the stock went from $1 to $2 I would apply the above or (because of the massive gains) sell some to re-balance my portfolio.

Just my opinion.

This is my approach. Others have different ones.

I tend to agree, however, there is another way which has worked for me with BBW. BBW have a 10% tax deferred capital return, so - over time you end up getting back your investment whilst retaining your shares. You don't pay tax unless you sell some of your shares at a profit.

I have traded BBW and followed the stock down on weakness taken some profits on the rises, whilst retaining a good helping for the dividends to reduce the base cost.

1 more year and I will have 16,000 BBW returning 10% with no tax payable, and ... the best part is that by then I would have had my original purchase price returned...in essence, free shares. (note: some of the return in this case is actually CGT payable gains)

I am currently working on BBP to do the same.