My Trading Log

[stthomas2004]

Sell CSCO @ 27.09 (-0.45)
Lost 2% on this one because I didnt check the price relative to RSI!! Prices making new highs when RSI isnt is not good!!!

[stthomas2004]

Buy 125 XLE @ 60.69 (Broke out, RSI hits high as price hits high)

EDIT: Also still holding AMGN as a short, it seems to be hitting support at 69.00 but I have a feeling that may soon break. Once the market corrects again this will hopefully be down big.

[stthomas2004]

Morning update, no trading going on so far, so I will give an update on how things are going in current positions.

XLE is up 40 cents from the buy yesterday, although is down from the recent spike as crude inventories came out.

AMGN is up today, but showed some good signs as far as the downtrend is concerned. It traded up as high as 70.00, hit the 200ma and fell, now trading at 69.40.

Im also watching SLE to see how it reacts after touching its 200ma.

[stthomas2004]

Short 100 SLE @ 16.85

Taking a very small position here just to see what happens.

[Yee Sian]

Broke yesterdays high.. but now it is down. Right now Im trying out several new strategies and none of them seem to be working!

Care to list some of them? You have a basketful of them(the RSI, ma20, MA50, MA200). But how do you know when to use which?

Hope things work out for ya(:

[stthomas2004]

I try to use a combination of RSI 200MA and 50MA as well as trendlines. Basically I have a ticker of the new high/lows and pull up the charts as they go by and see if theres anything Im interested in. Once I find something I try to validate my opinion through those indicators. Sometimes it works, sometimes it doesnt.

[lehayes]

With all due respect, I personally think they are all too expensive to buy or sell. Unless you are putting 20k or more on each. but then again, it's your money.

[lehayes]

Here is a document that I just wrote, see if it makes sense to you.

One of the biggest mistakes I have seen people do when investing in stocks is also one of the biggest questions that I have seen people ask. How much should I pay for a stock? How do I know when I have bought a stock at the right price? Because the answer is subtle many people learn about stocks but never learn the correct answer to these questions. Because of this, their biggest downfall in successful investing is to buy stocks that are out of their price range. They never get the right leverage so they never really make out good on the investment.

I once attended a stock training seminar. The reason I went to this seminar was to determine whether I knew all I felt I needed to know about stocks to feel free to invest in them. During the seminar, something struck me like a ton of lead. Every time they provided a calculation for a stock it was done in lot’s, quantities of 100 shares. So when they would perform a calculation, they would talk about buying 10 lot’s that would mean 1000 shares of a stock. When they finished with their calculations the students saw returns in the $1000’s+. This is the one thing I really learned well from this seminar.

So what does that mean to you and me. When you buy stocks you want to buy in the largest number of shares possible. Buy them in lots. This way you get accustomed to working with lots. It is a requirement when you perform options because options are only traded in lots.

When I see people say “I bought MSFT @ $30.00 per share, right off the bat, I am thinking wow these people spent at least $3000 ( $30.00 * 100 {or 1 lot}). So I have a casual conversation with them only to find that they could only afford to buy 4 shares. This breaks down to 4 * $30 = $120. Not much to play with. So let’s take a moment to see what the difference is here:

4 Shares @ $30, price goes up $1.00, the owner gets $4 in profit (fees not included)
100 Shares {1 lot} @ $30, price goes up $1.00, the owner gets $1.00 * 100 = $100.

As you can see, the difference is astronomical if you continue… try this one:

1000 shares {10 lots} @ $30, price goes up $1.00, the owner gets $1.00 * 1000 = $1000

But I can’t afford that kind of money to play in the market, you might say. Well, of course not, if you are playing the way the first example plays, you will never be able to afford it. So what can you do to fix the problem? Stop buying the expensive stock that is too much for you, aim lower. There are good stocks at lower prices.


Let’s take a look at the same scenarios from our example above, but this time, we will pretend that MSFT is only $10 per share.

4 Shares @ $10, price goes up $1.00, the owner gets $4 in profit (fees not included)
100 Shares {1 lot} @ $10, price goes up $1.00, the owner gets $1.00 * 100 = $100.
1000 shares {10 lots} @ $10, price goes up $1.00, the owner gets $1.00 * 1000 = $1000

They look the same don’t they, but now look at the initial investment to get into each:
4 shares @ $10 = $40 as opposed to $120 earlier
100 shares @ $10 = $1000 as opposed to $3000
1000 shares @ $10 = $10,000 as opposed to $30,000

Now with options you can leverage your money to buy more shares with less money. This was a great gimmick by the market makers to encourage you to buy more stocks. You can even take money on margin to increase it even more. I won’t get into the debates tied to these items, just know that it is possible.

So, let’s say you only have $1000 to work with, how do you make the decision on what stocks to buy? You now know the answer should be the amount of money you have divided by the number of shares or lots that you want to leverage. With a $1000 you can control 1000 $1.00 stocks, or 500 $2.00 stocks, or 300 $3.00 stocks, or 200 $4.00 stocks or 200 $5 stocks, etc. See we are keeping the stocks in lots and moving down the price tree from the top to come up with how you want to invest. If it were me, I would go for the 1000 $1.00 stocks. The reason is that with the more stocks you control, the more money you will generate back on your profit margin.

Here is a good question to ask yourself, why should you ever pay more than $10 per share or $20 per share for that matter? Can you think of any? I can’t either. Here is why.

Let’s assume that money isn’t an issue for you. So you run out and buy a $40 stock @ 1000 shares. That would be $40,000. Now for that same price you could have bought 2 stocks @ $20 per share, or you could have bought 2000 shares. Can you tell which one will be more profitable if you only generate $1.00 move from those stocks? Let’s see:

1000 shares of $40 stocks that goes up $1.00 would get you $1000 in profit.
1000 shares of 2 stocks @ $20 per share that goes up $1.00 would get you $2000
2000 shares of 1 stock @ $20 per share that goes up $1.00 would get you $2000

Hhhhmmm, based on this, the more shares the more money you make and the price made the difference. So when does it matter on how much you spend on a stock if you have unlimited money to work with. Here is the answer:

When you want to buy and sell stocks freely without having to wait a week for the transaction to process, you will buy into a stock with the amount of money that is less than 10% of the stocks total available shares. See the SEC mandated that if you buy more than 10% of a company, you have to register your purchase with the company owning the stock and with the SEC. This process takes about a week to perform. Now you know why guys like Warren Buffet move so slowly through the market. The more money you have to spend in the market, the higher your chance of owning 10% of a company. So, if you have $5,000,000 and you want to invest into a company that is valued at $50,000,000 and they were selling for $5 a share, then you would want to be careful. However, if you only have a $1000 or $10,000 or $100,000 then you may not have much to worry about if you were to buy a $1.00 per share stock.

This is the only reason why you would have to go up in the price on the stocks you want to buy. Going down is the only ideal solution because you will increase your leverage of stocks per $1.00 you invest.

Is this the only reason why we should be concerned with buying a stock cheap? No, there is another reason. When you have a stock at $10 per share and it only moves $.01, then you really don’t make much if you only have $1000 on that stock. However, if you have $1000 on a $1.00 stock and it moves .01, you have just made more money with less movement of the stock. Let’s take a look:

$1000 in a $10 per share stock gets you 100 shares of that stock, with .01, 100 * .01 = $1.00 nice profit…

$1000 in a $1 per share stock gets you 1000 shares of that stock, with .01, 1000 * .01 = $10, now isn’t that a little better?

So you see, the more shares you have of a lower priced stock the higher your returns will be in a shorter amount of time.

The next time someone asks you “How do I know what stocks to buy and at what price?” you know what to tell them.

Larry E. Hayes