blind-geezer...let me jump in the conversation here....
thanks, dude, but how good is your track record <ggg>
Let me tell you a little story from when I first started "self investing" way back in the late 1990's after partially firing the "full service" broker. It didn't take me long to find MBs and someone who seemed to know more than I did, 'cause of course I was ignorant as heck. [Not to say I'm not ignorant now, just that I have a better clue as to the depth of that ignorance...] So soon I was buying picks off of message boards when the most knowledgeable looking people were saying, XYZ looks good right here or AB is a buy here. You know what happened? Just about every time I bought one of those recommendations, I lost money!
How did that happened when the picks were by knowledgeable posters? Well a few years later, after I got a bit of an education, I figured out what happened.
1. In some cases, I bought too late in a cycle and bought near a high and either bailed out in disgust, at the wrong time, or got stopped out as prices rightly pulled back. Here's a chart of the HUI and its recent cycles that might be useful for timing PM purchases. It shows how one can buy a good stock, but at the wrong time and in doing it repeatedly, build up losses.
stockcharts.com
2. In other cases I failed to set a clear goal for my trade or a time frame for it either and once again lost money when a short-termed reversal came. Without a clear understanding of my time frame, positions that were put on as long-term holds got stopped out when short-term corrections caused loss of focus.
This taught me a few things:
A. One needs a target and stop-loss point in mind (if not hard orders) BEFORE taking any trade. I hire a stock to make me money and if it doesn't perform - fire it. Also I manage my risk by not taking trades with a high risk versus a low reward and by not putting large percentage of the portfolio at risk.
B. I listen to knowledgeable people on MBs but do all of my own DD BEFORE I buy a stock. In this regard the regulars here, Ames, schzammm, madharry, dave54, IAC and NC are pretty good at coming up with interesting companies and picks. That said, I always do some of my own DD before buying one of their ideas. Sometimes you'll also see me asking about those picks or disagreeing with them too.
C. I always have a time frame in mind for each trade...am I taking it to hold for a gain in a few days, a couple of weeks or months? Even on a stock that has LT appreciation potential, I still monitor its progress and am not afraid to fire it if it under performs.
D. I have my own "system" I use to pick stocks and am constantly revising and adjusting the system as I learn more, become a better trader and as market conditions change.
E. One of the things that I had been addicted to and which I still fight today is buying stocks when they "look cheap" rather than 1) when they are cheap, or 2) when they have stopped falling and are headed the other way. Remember Newton's First Law of physics...an object in motion tends to stay in motion with the same speed and in the same direction unless acted upon by an unbalanced force. It took me a long time to break the habit of catching falling knives but soon I learned that drops beget drops and any stock that has shed a goodly percentage isn't going straight back up, but needs to base a bit before recovering. Sure there are dead cat bounces, but if that is what one is proposing to play, then it is a ST play, one needs to be NIMBLE and one exits the trade on the first sign of weakness.
F. Trading is about putting probabilities in your favor, not being stubborn in the face of the market and manging one's risk.
Hope my story isn't pretentious. Nice to see a new face around these parts.
Good luck with your trading!
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