Credit Card ’s Talk

Trading stocks is a fascinating study of many interacting variables.

At any time, any number of factors influence stock prices…economic reports…Fed action…random movements…cyclical influences…world events. Heck, even the weather often has an effect. The list goes on and on.

Synthesizing all these competing factors into a single stock price is the action of market participants…individuals, professionals, institutions, mutual funds, and hedge funds. Their actions move some stocks up and some down while others do nothing. And, within various sectors, trends develop.

The point of all this is to show why trading decisions are not always a simple matter. And, yet, traders must make quick decisions if they want to prosper.

How many times have you seen or heard traders offering different explanations of why they think the market is going to do such and such? You hear or read about them all the time. And, much of the time, their explanations are nothing more than their own opinions and biases.

However, you don’t want to base your trading decisions on what they think. Much of what they say is what many market observers call noise.

To make trading decisions easier and give traders better insight into the technical condition of the market, various technical indicators were developed. They measure such things as investor sentiment, buying and selling pressure, overbought and oversold conditions, relative strength and many other market measurements.

Many of these indicators are good and do, in fact, give traders a better handle on price action. But how good are they in helping you make stock trading decisions?

Their usefulness varies but they all share a common trait.

At times they signal a market reversal to the day. But, at other times, they tend to be too late or too early with their signals. And, while many traders like to use divergences between various indicators and stock prices, they often occur well before a price reversal.

But many traders persist in trying to time their market decisions with a group of individual indicators. It might be the Relative Strength Index (RSI), MACD, stochastics, moving averages, oscillators or any number of others.

So they find themselves trying to determine which indicator is right at the current time. It could be any of them. The problem is they often diverge with each other. Determining which one is right often amounts to…guessing.

And, when you guess, your emotions have a field day. Fear tugs and greed pulls. When one wins out, you usually discover the other was right. Trading like this is no fun and, more likely than not, leads to losses.

There is a better way to make trading decisions.

It’s the use of a trading system and money/risk management.

Actually, the only decision you have to make is the decision to use them. After you make this initial decision, all your decisions are made for you.

A trading system tells you what to buy or sell and when. That’s it. You don’t have to decide which indicator is right or anything else. You get a trading signal and act on it…that’s mechanical trading.

Then money/risk management takes over and makes your other decisions.

How much do you want to risk on each trade?

If you decide on 2% or 3%, that’s where you always set your initial stop. If the stock declines by that amount, you are stopped out for a small loss. But here’s what you accomplish…you prevent a small loss from becoming a large loss.

And you should always know where this price point is before you enter the trade.

If the trade is profitable, you cancel the initial stop and start following the price up with trailing stops. When a stop is hit, you’re sell part or all of your position. By doing this, you protect and maximize your profits. The only thing you have to decide is where to place your stops.

With a little practice and experience, these decisions become rather routine.

When you think about it, this is a trading method that takes decision making to the extremes of ease. Let your tools make your decisions…while you make money.

And, if you’re wondering about the profitability of trading systems, you should realize that all trades are not winners. But, part of the beauty of trading is, they don’t have to be. Because of money/risk management, profitability is possible with far less winners than you might imagine.

Good traders can make money with a winning rate of 50% or less.

But here’s the good part about this method of trading…your emotions are rendered helpless.

Making good decisions with your emotions tugging at you is hard at best. Fear and greed are experts at making shambles of trading decisions. They specialize in costing you money.

So what do you do? You take them out of the picture.

Oh…fear and greed are still there… lurking around in your mind…but they’re mute. They still want control but you don’t hear them.

When you trade mechanically and follow risk management procedures, your decisions are devoid of emotions.

Quite simply, this is a better way to trade.

But don’t misunderstand about indicators. They’re helpful and give you a good peek at the inner workings of the market. But, if you use them for trading decisions, develop whatever you use into a trading system. And trade it mechanically.

It takes the guesswork out of trading stocks.

So there you have it…

An unemotional way to trade because your decisions are made for you. There’s no more guessing which indicator is right. Decision making doesn’t get any easier. And, best of all, it’s the profitable way to trade stocks.

Thomas McNatt trades full time. His website, http://www.trading-stocks-profits.com is a valuable source of information and resources for traders.

Investing in penny stocks provides traders with the opportunity to dramatically increase their profits, however, it also provides an equal opportunity to lose your trading capital quickly. These 5 tips will help you lower the risk of one of the riskiest investment vehicles.

1. Penny Stocks are a penny for a reason.

While we all dream about investing in the next Microsoft or the next Home Depot, the truth is, the odds of you finding that once in a decade success story are slim. These companies are either starting out and purchased a shell company because it was cheaper than an IPO, or they simply do not have a business plan compelling enough to justify investment banker’s money for an IPO. This doesn’t make them a bad investment, but it should make you be realistic about the kind of company that you are investing in.

2. Trading Volumes

Look for a consistent high volume of shares being traded. Looking at the average volume can be misleading. If ABC trades 1 million shares today, and doesn’t trade for the rest of the week, the daily average will appear to be 200 000 shares. In order to get in and out at an acceptable rate of return, you need consistent volume. Also look at the number of trades per day. Is it 1 insider selling or buying? Liquidity should be the first thing to look at. If there is no volume, you will end up holding dead money, where the only way of selling shares is to dump at the bid, which will put more selling pressure, resulting in an even lower sell price.

3. Does the company know how to make a profit?

While its not unusual to see a start up company run at a loss, its important to look at why they are losing money. Is it manageable? Will they have to seek further financing (resulting in dilution of your shares) or will they have to seek a joint partnership that favors the other company?

If your company knows how to make a profit, the company can use that money to grow their business, which increases shareholder value. You have to do some research to find these companies, but when you do, you lower the risk of a loss of your capital, and increase the odds of a much higher return.

4. Have an entry and exit plan - and stick to it.

Penny stocks are volitile. They will quickly move up, and move down just as quickly. Remember, if you buy a stock at $0.10 and sell it at $0.12, that represents a 20% return on your investment. A 2 cent decline leaves you with a 20% loss. Many stocks trade in this range on a daily basis. If your investment capital is $10 000, a 20% loss is a $2000 loss. Do this 5 times and you’re out of money. Keep your stops close. If you get stopped out, move on to the next opportunity. The market is telling you something, and whether you want to admit it or not, its usually best to listen.

If your plan was to sell at $0.12 and it jumps to $0.13, either take the 30% gain, or better still, place your stop at $0.12. Lock in your profits while not capping the upside potential.

5. How did you find out about the stock?

Most people find out about penny stocks through a mailing list. There are many excellent penny stock newsletters, however, there are just as many who are pumping and dumping. They, along with insiders, will load up on shares, then begin to pump the company to unsuspecting newsletter subscribers. These subscribers buy while insiders are selling. Guess who wins here.

Not all newsletters are bad. Having worked in the industry for the last 8 years, I have seen my share of unscrupulous companies and promoters. Some are paid in shares, sometimes in restricted shares (an agreement whereby the shares cannot be sold for a predetermined period of time), others in cash.

How to spot the good companies from the bad? Simply subscribe, and track the investments. Was there a legitimate opportunity to make money? Do they have a track record of providing subscribers with great opportunities? You’ll start to notice quickly if you have subscribed to a good newsletter or not.

One other tip I would offer to you is not to invest more than 20% of your overall portfolio in penny stocks. You are investing to make money and preserve capital to fight another battle. If you put too much of your capital at risk, you increase the odds of losing your capital. If that 20% grows, you’ll have more than enough money to make a healthy rate of return. Penny stocks are risky to begin with, why put your money more at risk?

http://www.1source4stocks.com>Trading Penny Stocks investment strategies for penny stocks
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Humpty Dumpty had a great fall and all the King?s horsemen could not put Humpty Dumpty back together again.

The Stock Market has had a great fall and all the brokers, CEOs, analysts and politicians have not been able to get it back up again.

Oh, it will go up again, but if history has a way of repeating it will be a long time before we see it at ?even?. From 1920 to the present there have been 3 major bull markets lasting close to 16 years. Unfortunately, each has been followed by a bear market of about the same length of time. So far we are ending the 3rd year of the projected down cycle with only 13 more years to get to the bottom. It is a long way off.

At a recent investment seminar one of the speakers asked his large audience if they believed the stock market would be higher 5 years from now. Every one except one thought it would be. The current mindset of most investors believes this also. For the period from 1982 to 2000 (18 years, close enough) there has been a bull market. Every investor has considered himself to be a financial genius during that time. There is an old saying, ?The market makes fools of us all ? sooner or later?.

Unless you learn to listen to what the market is saying and not your broker, you will be able to recoup some of your losses, but probably not all. During this long-term bear called a secular bear market, your main effort will not be to make money but to keep from losing more. During a bear market the one who loses the least is a winner. You may not like what I say, but history has that strange way of doing it over and over.

Maybe I am wrong about it because ?this time it is different?. I hope so, but you can protect your money in your 401K or elsewhere with a simple loss limit order. Call your broker and have him place a 10% (or whatever number your prefer) stop-loss order on all your positions. That way you don?t guess about where to sell; you let the market tell you when it has turned weak.

Brokers and brokerage companies hate stop-loss orders and will try to talk you out of it. Ask him if he will guarantee your portfolio. You can bet he isn?t that dumb. It is your money. Once it is gone you will have very little chance of getting it back. Protect what you have left.

Don?t be a Humpty Dumpty!

Al Thomas

Author of If It Doesn’t Go Up, Don’t Buy It!

Never lose money in the stock market again.

http://www.mutualfundmagic.com

When will the stock market stop going down and start up again? If we knew that we?d all be jillionaires. So what do you do now while stocks are going down and stealing away your money every day?

What does history tell us? Here is one very interesting fact. From 1920 to 2000 there were 3 bull markets that lasted about 16 years each. It seems the most recent one ended at the end of 1999. What is most scary about this is that after these long bull markets each one was followed by another period when the stock market went down or sideways for another 16 years. Look on the bright side. We only have 14 more years to wait for the next bull market.

Wait a minute ?

Wall Street has been telling us this is only a correction and now is the time to buy. What do you think they are going to tell you? They have stocks to sell and must make commissions or they will be out of business. Someone has to buy that stuff and guess who got picked? Right. You.

There are only a couple of safe places. A government-backed money market fund or some government short to intermediate bonds that will pay you about 5%. Unfortunately, too many people still think the stock market is going to make new high prices, but it ain?t gonna happen. The smartest thing you can do is protect your money from further depreciation. If you don?t take action now you will see your money disappear at about 10% to 20% (maybe more) over the next couple of years. I know your broker said the market always comes back. Well, I hope it does - in your lifetime. But you have to be smart enough to protect what you have right now.

The few wise men of Wall Street who speak the truth ? Sir John Templeton, Warren Buffet and a few others ? have said you will be lucky to make 5% over the next few years. To me that means you can be safely in bonds and sleep at night.

The great secret of success in the stock market is not buying; it is selling. Any fool can buy, but unless you know when to sell you are in trouble. Go thru the stocks and mutual funds you own right now and ask yourself this question: Would I buy this puppy now? If the answer is ?NO? then the best thing to do is sell it and put your money in something that will not depreciate over the next 14 years.

Rule one: Don?t lose money. What are you doing to protect yours?

Al Thomas’ book, If It Doesn’t Go Up, Don’t Buy It! has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

1-888-345-7870; al@mutualfundstrategy.com

Before they go over the cliff to their destruction these little furry ones get together for a party and celebration. Each tells the other how smart he has been with his investments and buying and selling of stocks and real estate.

Wait a minute. Did I say lemmings? I think I meant investors. It seems they had that same party in January 2000 and it was a doozy that lasted for several months. A great time was had by all. They did not have one in 2001 as membership dropped off. Nor again in 2002 and by 2003 there wasn?t anyone around at all.

The lemmings (oops, investors) had gone over the cliff. And they were such nice little guys too. The few at their party who tried to preach caution were drowned out with loud squeals that the market was going to 40,000 or maybe higher.

This new crowd said it will never happen to them as they are not going to put their money in that risky stock market. Oh no, there is a really safe investment that always goes up ? real estate. There is only so much land and no more is being created. The population is expanding so the demand will continue and prices can only increase.

Even for the novice speculators there is a place to make big bucks. They are joining real estate clubs just like the old stock market investment clubs to which they have previously been members. Put in a few thousand and watch it grow as the real estate market keeps going up and up. These investors know they are on the verge of great expectation that will mean wealth. Wealth without work or effort. Maybe they forgot how much they lost from the expert advice in that previous investment club, but everyone knows real estate is a sure thing.

A stock investment is just a piece of paper, but real estate you can feel the dirt, walk through the building and slam the doors. That?s solid. You can?t miss. With each deal they recognize how they are getting smarter and smarter. Hurrying, doing nothing constructive to make their fortune. Just like in 2000.

For more than a year the professional traders, insiders and large institutions have been quietly selling their stocks and I am now beginning to hear of sales of major properties. Just because someone has a lot of money doesn?t mean he is smart. These groups can be as wrong as the little investor.

Real estate may continue to be an excellent investment, but speculation in real estate can be hazardous. If, or maybe I should say when, this market stops going up or even starts down it is very hard to sell a property. Payments must be made and upkeep maintained. It is possible to rent out some houses or offices, but the income ratio today does not allow a breakeven to costs.

These real estate lemmings don?t seem to care. They are gathering in larger groups and are working under the greater fool theory.

This is a time for caution as it was in 2000 for stocks. You don?t want to go over the cliff again.

Copyright 2005

Al Thomas’ best selling book, If It Doesn’t Go Up, Don’t Buy It! has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter to receive his market letter for 3 months at www.mutualfundmagic.com to discover why he’s the man that Wall Street does not want you to know.

On Friday or Saturday evening my wife gets a movie from Block Buster and after dinner we sit, hold hands and watch. This week she brought back one that I think every investor or anyone contemplating investing in the market should see. It is called Boiler Room.

How many times have you been called out of the blue by some no-name broker who wants to make you rich provided you buy shares in this great new issue or some stock that is just about to take off.

Usually they start off with do I remember he called me 6 months ago and recommended so-and-so issue that is currently in the news because it has gone up 100 or 200%. He did not make that call and if he had I am sure I would not remember it. Also the name of his firm is one I never heard of, but it sounds very legitimate and he might even say they are affiliated with Chase Manhattan Bank or some other big bank. They might have their checking account with that institution, but otherwise they have no connection with them. Now he has another recommendation that is going to do even better that that one. Yes, and pigs can fly!

If you haven’t done so yet don’t let him go any further. Hang up. Oh, I know you can’t because your mother taught you it is rude to hang up on people. Please, this time DON’T listen to your mother. He will try to get you into a conversation by asking simple questions that must be answered with a Yes. Stop listening. If you can’t bring yourself to hang up then put the phone down and walk away. In 10 minutes he will be gone to call another sucker.

There really are boiler rooms out there selling worthless securities and everything they do is 100% within the law and 100% immoral. How do I know this? I used to own a brokerage firm and I received monthly reports from the regulatory agencies outlining charges against these shady dealers. Fortunately, I did not have those problems as I would not allow hype to open accounts.

The things being told on the phone are usually too good to be true and that is a fact. Do yourself a favor and rent that movie. Not all brokerage firms are like this, but remember my basic rule.

NEVER SEND MONEY TO A VOICE ON THE PHONE.

Al Thomas’ book, If It Doesn’t Go Up, Don’t Buy It! has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005