Buy/Sell

[Airelon]

Well, $3,000.00 is a pretty small amount. If ones truly wish to start out in this business, I generally suggest no less than $25,000.00

That's not to say that it's impossible with only $3,000.00. It's just that the strategy has to be different. For example, I started a "Challenge Account" where I publicly am managing a starting investment of $500.00, and only $100.00 addition deposit every month. I created a rule set, and strategy - that revolves around the size of the account as to

1) How often I'll trade so as not to be hit with drawdown and overtrading. If I have a trade within a month and have a win, then all the better. At the first loss, I have to wait until my next deposit that covers the size of that loss and then some.

2) Still increasing the account size, while simotaneously not killing the monthly deposits.

3) You can trade over the 3% to 5%, if your incoming deposits make sure that said risk is covered.

And yes, it means you can't afford much in the way of risk at this point. For example, a $3,000.00 account, 3% to 5% is between $90 and $150 per trade. Which calls for an understanding of technical analysis. You might be able to follow point 3, and risk, say, 10%. But only if you make another deposit of $300.00.

Following those money management principles? I've had 3 trades lately, with only 1 of them a winner. But I'm still up on my money.

[Dee]

anyone think ACAD can ever rebounce ? i'd hate to sell after loosing about 80%.

[Jerklian]

All,

My first reaction is to tell Dee that if you're ever to become successful the sentiments and attitude must be changed - "I'd hate to sell after loosing about 80%" seems to represents many (common) mistakes. Dee, I can sympathize but anyone will tell you that approach is not the productive one. I suppose a mistake must be defined in terms of your strategy but since you are asking for strategy advice it feels an appropriate label.

I wanted to say that you've gotta have a stop that defines your initial risk and then an exit strategy to keep profits or at least improve losses (as compared to the initial risk). BUT, I then noticed I'm on the investing board and I don't know how the conversion works from trading to investing. As an example say someone intiates a position in BAC at $40-something and while it's a divvy play which changes attitudes on price moves, how do you warrant or plan for declines in investments of 25% plus? Do you implement postion sizing principles as a percent risk of portfolio just as in trading?

Maybe someone can shed some light on this so Dee and I can learn together.

[Jerklian]

Quickly I will clarify my question.

If I am trading, then down 80% will never happen (unless the gap down of my worst nightmare occurs). If my initial risk was defined that large, then I must have some amazing upside potential - but even then my position size would be so small...anyways, you get it.

HOWEVER, if I am instead investing what are the relative philosophies on taking a loss vs. DCA a position? I suppose this is a much less mechanical arena of play. My (tentative) system for trading is, chronologically speaking:

research - setup - entry - and then let it go (meaning the stops and multiple exits take care of the rest)

Because of this Dee's 80% loss in ACAD looks unacceptable, yet if I take on a long term position I don't know how to protect from such a possibility.

[stockrich]

First we should only invest in the best 6 months and not risk our money in the worst 6 months, the best 6 months makes 90% of all tha gains each year anyway and avoid the biggest losses like in august,sept,and october.

Also we should buy only on break-outs of proper bases with higher volume for right timing is everyting, and sell at certain criticle times like if the Braod market is falling or if yor stock ever breaks down below the 150 day moving average.

Theres more you can see at my website if you want... The Stock Teacher, Stocks ready for big moves !

[Airelon]

Somehow I missed your question mate.

I will agree that I'm a big believer in seasonals, which means for the next few months, I won't be investing in the stock market.

But on the earlier question I will state that when I invest an amount in cash? I view the total amount at risk. In other words, if I invest $600 towards a particular stock? I usually only do so with a steady DRIP stock, and view the entire $600 as risked. I'm with it until at least $2000 return, or $0.

[Jerklian]

That's interesting, Airelon. Hopefully you will go into this further...I have had a difficult time organizing my plans for my investment account mainly due to the discrepancy b/t the two practices.

Now, you have this totally separate account (if I remember correctly) for investments. Do you then take a position just as you would with a trade, based on percent of capital risked?

por ejemplo:

Your $600 dollar investment would be 2% risked of a $30,000. You would then have a target, or some exit strategy where you (initially at least) risk the whole position.

Can you clarify and take me through your exit? Do you pick a strict target or do you finally have some exit strategy once the position is profitable?

Also, as to DCA of a position...you would only do this if your (let's say) 2% risked is on a $60,000 account where you would have a further $600 to add to the position?

[Airelon]

Originally Posted by Jerklian

That's interesting, Airelon. Hopefully you will go into this further...I have had a difficult time organizing my plans for my investment account mainly due to the discrepancy b/t the two practices.

Now, you have this totally separate account (if I remember correctly) for investments. Do you then take a position just as you would with a trade, based on percent of capital risked?

Precisely.

por ejemplo:

Your $600 dollar investment would be 2% risked of a $30,000. You would then have a target, or some exit strategy where you (initially at least) risk the whole position.

Precisely. If I have a $30,000 account, I actually risk 3% on investments. So $900.00.

So let's take EXAMPLE company. I make sure they line up to what I want in an investment (DRIP's, good and healthy dividend paid quarterly for many years, etc), and then I spend all $900.00 on the investment. My risk - is $900.00

Can you clarify and take me through your exit? Do you pick a strict target or do you finally have some exit strategy once the position is profitable?

Even better question. For investments? It really does depend. My bare minimum in the above example would be a return of $2700 (3x's the risk). But that's bare minimum. But I monitor my investments, and make sure that things are remaining healthy for long-term prospects. The nice thing about DRIP investing, is that it's not unreasonable to expect returns in terms of hundreds of percentage. You just have to be patient enough to wait. I know a guy who bought $300 worth of GIS back in the 1960's. He never again added any capital to the purchase.

That $300, through splits and DRIP's? Is now worth $180,000.00. Now imagine if he had added capital throughout the years. The other kicker when it comes to DRIP investing, is that taxes can be a pain, as far as the record keeping, where you're cost basis is, and for how many lots.

Also, as to DCA of a position...you would only do this if your (let's say) 2% risked is on a $60,000 account where you would have a further $600 to add to the position?

Well, usually? Usually I turn off my DRIP in the summer time, when the markets are peaking. I'm not doing it this year, due to the bear market. I want to pick up more shares at low prices. But many times, I have 20 stocks that are paying me cash in the summer time. In addition, I add money to the investment account from my trading account profits so I have more to invest. So I'm moving money from A to B, so that I have more to invest.

I consider DCA'ing based on fundamentals. If the company still looks strong, I'll DCA. Generally - I add any amount under 3% of available cash to a position.

Hope this helps mate!