Rolling stocks

[emily]

hello fellow investors,
i'v been paper trading for quite a while now (2 years), trying to find a suitable strategy that suits me. i have learnt technical analysis from books and have been applying the theory to practice by paper trading. I read about rolling stocks, stocks that bounces off resistance and support so often.

examples of this are,
OPM buy 0.002 sell 0.003, 50% return
ZYL buy 0.003 sell 0.004 33% return
LIO buy .004 sell .005 25% return
.......... and many others

and they just keep rolling and i keep doing the same fing over and over again.
am i doing this properly? because this sounds too good to be true....... i do use indicators to see if its to break the support line.
does anyone else trade on rolling stocks ?

 

[bvbfan]

examples of this are,
OPM buy 0.002 sell 0.003, 50% return
ZYL buy 0.003 sell 0.004 33% return
LIO buy .004 sell .005 25% return
.......... and many others

what about the downside risk
what if OPM went to 0.001 after you bought, then your on a 50% loss
if ZYL went to 0.002 -33%, LIO went to 0.003 -25%

also on these fraction of penny stocks the market depth is quite deep. I've seen orders for 50,000,000 in some 0.002-3 stocks and more for 0.001 stocks, you'd be waiting a long time to get your fill, if your order doesn't expire while waiting

its a very dangerous game to play this low price stocks IMO
I try to stick to ones above 1c as a general rule

 

[mime]

I tried that strat awhile ago and lost. The problem is the stocks that cheap maybe on the verge of collapse and then you loose all. That's what happened to me. You should still try it out though. That's the best way to learn.

 

[doctorj]

The other thing to consider with these trades is the difficulty getting a fill and the large number/volume of orders at the inside.

For instance, to buy ZYL at 0.3cps, you'll need to wait behind everyone else who have already ordered. Occasionally people will get impatient and fill at 0.4cps. If eventually there are enough people willing to sell at 0.3cps and you get filled after everyone else that was in the queue before you, you need to join the long queue to sell and hope that people are still impatient and want a fill at 0.4cps rather than 0.3cps.

That's the trouble with buying these 'cheap' shares that bounce up and down a tick, its nigh on impossible to trade in profitable volumes.

Also, if you're hoping to get away within T+3 in order to get greater leverage, forget it... chances are you'll be waiting weeks, if not months to get your buy and then your sell filled.

Finally, as some one else said, consider the Risk/Return in the situation where it drops to 0.2cps and you decide you want to get out.

 

[emily]

ok, u got me thinking.......... if theres a seller, there has to be a buyer right.
so if a stock was to hit its record highs, who would want to buy it ??....what will happen to the seller ? i dont quite understand the concepts of buying and selling yet....

for example, XYZ hits record highs of $1, everyone sells to take their profits, but who are the buyers. who would consider buying it at record highs ?....

ok someone please help =)

 

[bvbfan]

if theres a seller, there has to be a buyer right.
so if a stock was to hit its record highs, who would want to buy it ??....what will happen to the seller ? i dont quite understand the concepts of buying and selling yet....

for example, XYZ hits record highs of $1, everyone sells to take their profits, but who are the buyers. who would consider buying it at record highs ?....

ok someone please help =)

okay on your example of XYZ, the people buying would be ones expecting the trend to continue, perhaps momentum players

in any liquid stock there should be a buyer for every seller, however the price that the buyer will want to pay may not meet what the seller wants
if the buyer fears missing out they may bid up to meet the seller, if the seller fears losing profits then may sell down

getting away from stocks, OIL would be an example of people buying on highs, in the last week its made quite a few highs has it not?

 

[RichKid]

hello fellow investors,
i'v been paper trading for quite a while now (2 years), trying to find a suitable strategy that suits me. i have learnt technical analysis from books and have been applying the theory to practice by paper trading. I read about rolling stocks, stocks that bounces off resistance and support so often.

examples of this are,
OPM buy 0.002 sell 0.003, 50% return
ZYL buy 0.003 sell 0.004 33% return
LIO buy .004 sell .005 25% return
.......... and many others

and they just keep rolling and i keep doing the same fing over and over again.
am i doing this properly? because this sounds too good to be true....... i do use indicators to see if its to break the support line.
does anyone else trade on rolling stocks ?

Hi Emily, nice to see you trying a particular strategy. But as you've probably realised it's a different ball game when you have to trade live.

Firstly, if you don't mind, what are the books which mention the 'rolling' method?

Secondly, have you thought of using filters to find stocks with sufficient trading volumes and price movement (volatility) to reduce your risk? I've tried what you mention above on low priced securities but it can be an all or nothing game. What I find is that you can apply the same concept to higher priced liquid stocks which are ranging. For example I'm currently in BMX and it has a nice pattern which can be traded in a weekly or monthly timeframe. Brerwallabie has traded CBH in a smilar manner and LHG too I think. Basically buying on support and selling at resistance where stocks are in a trading range (eg rectangles), downside risk can be mitigated by tight stops and using stocks which have solid support levels. Upside risk can be managed by selling part of your holding at resistance and the rest if it fails to break through (or holding on to the remainder if it settles above the resistance). I've discussed this elsewhere as has Tech/a. A search on BMX, CBH and LHG on asf may yield some interestng graphs, I'm sure there are others. This is not a recommendation to buy those stocks, they are at different price levels now anyhow so may not be suitable. Also be aware of the very real possibility of it gapping down through support or your sell order not being filled (or even placed) for other reasons. Indicators do lag so you may be a day too late, but you may have a method which works. Good to see the paper trading going well, it's a great way to learn!

As for differing views of buyers and sellers: when you sell at resistance you are assuming it'll hold whereas buyers may think that this is the breakout about to happen (for various reasons from fundamentals to technical to just pure gambling instict), it's just one of those things where somene has a different view- like going to the shops, some people pay $500 for a pair of shoes others think anything above $50 if a rip-off; some pay $500k for a car others may only pay $400k for the same car, just a matter of opinion, not everyone thinks the same, hence the market. When prices are at the same level for awhile it means everyone agrees, then something changes and it moves- that is what makes a market. Think of garage sales too, you 'get rid of' old stuff for what you think is good money but bargain hunters may find that it is 'dirt cheap', it doesn't have to be rationale, it just happens- no point trying to work it all out, but it's good to examine it, we've been trading/bartering for centuries.

Hope this is relevant to you.