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Looking over years of trading, I suppose I have made all the mistakes that can be made in trading, from stocks, options, and futures. For a long period of time I thought technical trading was the only way to go, partricularly using stops to protect equity. But, looking at charts, one with only basic trading ability can spot support, resistence, and breakouts with moving averages, etc. I believe these spots, where most stops have to be placed are sucker plays to be scooped up by the professionals. Take a chart, any chart, over the long term, and one can find where trading stops and breakouts are violated just long enough to take the sucker's money. Having said all this, I believe one has to be both an investor, and trader. I start by determining that good fundamentals are present, and if so, start accumulating small amounts as the stock trades around a congestion area. I figure if it was good at $30, then it still should be good at $25, unless the fundamentals change. I spread the risk over 15 to 20 different stocks, commiting only a small amont of equity to each stock. When I get a windfall in a stock I either take profits or put a trailing stop under it. The downside of all this is (1) commissions (they don't call them commission houses for noth'in), and (2),the strong chance that a few stocks are going to head south and stay there for a long while until they are traded out. But, look at long term charts of the DOW 30, and many other charts, and it can be seen that most come back over the long term. This leads to the next all important item, VALUE. I stay away from penny stocks, and most stocks under $5. These are all subject to pump and dump, and I have had more than one go into chapter 7. Just my thoughts, but I wish I had this education 30 years ago, and had not had to learn the hard way. I could have sent a couple of people through Harvard. |
