For David
To: George Burdell (17327 )
From: Rande Is Monday, Dec 27 1999 11:48AM ET
Reply # of 17340
To all. . . . . . . . . . . Don't be fooled! . . . . . . . . . .
This is mostly for the benefit of those that are less experienced. . .
CMGI was an excellent example of MM shake today. . .
Imagine you are a Market Maker. . . your job is to play against the market, [which adds liquidity]. You know that some stocks like YHOO or CMGI or DCLK are just going to keep on outperforming the market throughout 2000. . . so every now and then you work the stock down as fast and as far as you can until it gets hit with heavy volume. . . then you cover and buy low into the panic. . . then run the stock back up before the small investors can even figure out what is going on. . . and if they do and they buy back in. . . you simply do it again and again until the stock will rise and fall with less and and less volume. . . . now you are back in the drivers seat.
Now here is where it gets ugly. . . . .just prior to the end of the year. . . when most investors are concerned primarily with getting to the next year to postpone capital gains taxes. . . .you, as the market maker, shake the tree exceptionally hard. . . . anyone trying to hold their profits until the end of the year. . then get nervous . . .and you shake harder. . .until they finally give up and sell . . . . this is what we are seeing today on stocks like CMGI, ICGE, VERT, etc. etc. . .
Then, at some pre-set low price. . . the brokerages call all their best customers and say. . . "if I can get you into ICGE at 140 and CMGI at 210, can I count on you for 50k of each?" . . "I have it on good authority that there will be news, a split and an upgrade" . . ."what do you say? . . .yes? great!"
So now the market makers are given a target [remember they work for the brokerages]. . . where they will be covering and going short. Are they going to tell you? Of course not. . . that would be like announcing to the defense that you are going to run a fake punt.
So this very heavy buying suddenly hits the stock at the pre-set low price, forcing it up faster than the individual investor can "catch" it. And off the stock goes. . . back to the races. . . you thought you were smart selling at 160, when it went to 150 the next day. . . but it just opened at 175 and is now selling at 192. . .are you going to buy back your shares 32 points higher? Too late. . .it is at 205 and has just announced a 2-for-1 . . and received a big upgrade to 350 by that same brokerage house that bought that low so heavily. . . .and suddenly your stock is at 260. . . .+100 from where you sold. . .
And THAT, my friends. . .is how the markets really work. . .especially with the high-fliers.
If you are going to get profits by trading. . . you must be extremely vigilant and aggressive. . . never willing to give up your profits. . . you bank your profits often. . . and scalp whenever possible. . . .either that or you lie in wait with a terrific position, until it is entered into the popularity contest. .. . .or you stick your money into a long port and watch passively.
If you casually daytrade or swing trade. . .you will lose everytime. . you cannot do those casually. . . but must be ferocious in your trading. If you take positions and wait for favor. . . be sure to SELL into the strength. . . and repeat your process. . . if you decide to become a long-term investor in your position trades. . .you will lose by losing patience and selling early. And if you decide to hold a portfolio of great companies long. . . then leave them alone. . . .resist the temptation to trade them.
Now we have developed a "hybrid" trading style here on the HOME thread, where we do some of each. . . on the very same stock. . . .but if you are doing this. . . be sure it is never on more than just a few stocks at a time. . . or you will go into overload!
Hold your longs long. Set strict targets on your positions. And if you are swing trading or daytrading. . . don't go for the gold. . . .scalp! Scalp all the way up . . .and if you have a margin account that allows short-selling. . . then scalp all the way back down.
NEVER turn a daytrade into a position trade. And never turn a position trade into a long-termer. Choose your long-termers carefully. . . and etch your position targets in stone.
Plan your trade then trade your plan.
The point is to be a winner. . . and never a sucker. Remember. . .
The Market Makers, the brokerages, the large size investors and the insiders ALL have many advantages over the individual investors. So we must have more skill, discipline and patience.
Rande Is
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