Hi Dorothy.
I read those rules today and thought they were good. I wish I knew about them in early 95 when I started trading more actively. I can tell you that I am guilty of having made just about every one of those mistakes. Still make many mistakes.
My favorites were: #4, 15, 18, 23, 37, 38, & 47.
>>>Am generally not comfortable trying to deal with stocks that
>>>trade on low volume.....wondering how can it go up so much on that
>>>volume?).....So, I miss out because I don't see how I can engage
>>>(prudently)....Any comments would be welcome.
You know that I am not comfortable with low-float/low-volume stocks either but most of these 2nd. tier net stocks are tradable. Let's take EFNT as an example. The stock was trading between 35-41 for weeks with ~200k-300k average daily volume. If you were watching it tick by tick, you would have been scared away. Always very volatile & moved a couple of points on few hundred shares. However, if you had entered a limit buy GTC order @ 36(stop at 34, below recent spike-low) and once filled, a limit sell order @ 39, you would have made ~10% in the stock while the stock was range-bound. A lot of these stocks need news (directly or as sympathy play) to break their trading range. Therefore, in anticipation of breakout, you could have also left a limit buy-stop order at 43(above recent spike-hi). Once that order was filled and you were notified by pager, email, or phone, you could have researched to see why it broke out and depending on your assessment of the news you could have placed one or two limit sell orders(1/2 below first resistance of 50 and 1/2 below the 2nd. resistance of ?)
I think you can develop a trading system around these earnings-less or low-float/volume stocks as long as you don't watch them tick by tick and don't thrive to be a day trader. You just have to know the stock & to some degree have a sense of market direction. Your entry is very important because if you buy at the bottom of its trading range or above its breakout level, you have less to risk and by placing your stop-sell order you can limit your loss.
Have you ever read a book by Nicolas Darvas named, ""How I made $2M in the stock market"? I read it back in 96. He talks about his system that is based on trading stocks as they move within their range(box) or move to the next higher or lower box. Two lessons that I learned from that book were:
1. Try to come up with a trading system that fits your personality & life.
2. Let the action in stocks tell you which way the stocks/markets are going, not the financial media or other traders.
Take care;
Clint |
