OTC:BB Momentum / Day Trading vs. Long / Short Term Investing Part 1
Since I have been on-line after losing my royal backside last year so I started off new in June and with a whole new prespective. Allen Markoff (mentor) I got lucky enough to get to know him. His posts were diliberate and filled with valueable research information. His tolerance with my stupidity of the market help me to gain the edge I needed to adapt and overcome the OTC arena. I have repeatedly told every investor that they should research the fundamentals before buying into a stock. However, as with some stocks the sleepers are the most profitable IF you can locate them. This involves far more than just the normal Due Diligence (DD). This mainly encompasses of getting to know the company, management, potential and its business inside and out to the greatest degree possible. While and after doing you reseach plus verifying every single possible lead you need to determine the "Unfair Advantage" whether it be a person as a CEO, product, technology, patent, etc. Next you have to establish some type of time frame for the potential to mature not to mentioning considering the amount of downside risk involved. This is a full time job for an investor especially if they have limited funds to invest. Find stocks that you would put your family in. That is basically when you start to look at investing the same as a broker.
The best way to establish a discipline for investing is to fine tune your principals for trading and educate yourself. One key aspect to a stock's growth is the accumulation by investors at the base. This is why charting and historical pricing is so important, which is what Ray Cunningham, another mentor who rarely trades in the OTC arena unless he has a solid tip, does. Ray basically posts on Subject 10936 . His posting and knwledge has taught me so much and has saved me from making serious mistakes investing in stocks. Though he investing in the bigger baords I have adapted some of his principals to the OTC. This is a great concept and the safest way to short term trade because most savvy investors use this as a way of making good money without the dangers of following a stock picker. Why? Because of front running.
Front running means loading up into an stock with advance knowledge or rumor of an impending news, buy reccommendation, or anything which may affect the stock price. Most everyone on line front runs a stock including myself whether it be for momentum or long term investing. This is going to happen regardless of who it is. In life it amounts to first come first served. The dangerous part is who got in, hold the floor and for what reason. Charting and historical trading logs can save you a lot of money. Here are two technical sites I find most useful tscn.com and historical pricing tradepbs.com . These two sites will allow you to customize the time variable to see more clearly what the stock has done and if front running has been done.
Every single investor should consider investing fundamentals! If you do not then you will end up owning a position in a stock that you do not want to own. Investing, however, is different from speculating for the big bucks because it requires research and analysis which takes time and patience. Unbelieveable will as you watch stocks run and you are not in them. Novice day / momentum traders tend to get caught in the momentum trap of stock price changes and volume, "the action", and ignore the fundamentals. Where with savvy day / momentum investors with real time let the action tell them whether to buy or sell. In other words a lot of these types have a short term outlook and sheep mentality typically just doing what everyone else is doing. These people are always complaining about how they were a victum to pump and dumpers.
Savvy day / momentum traders do not get caught at the top. Most of the time rookies, newbies, and the naive do. Now I consider myself a savvy investor and even I get caught in one occassionally. Everyone makes a bad pick once in a while. Once that happens tempers flare and emotions run out of control. No one wants to buy into a stock tip and it tanks. Example CSCA was my last pick where I brought it out on possible news and boom it held at a vertain piont then suddenly it tanked catching me and some friends. That has not happened in a LONG time but it did. So no one is immune to catching a bad pick. If the fundamentals are sound then investors buy and wait, where the speculator sell and moves on.
One other problem is the popular opinion of the stock. When it went up disgruntled people caught on the last run up holding on sold off. Another part of researching a stock that needs to be considered. Read the threads to see the attitude towards the stock. If the thread goes silent and the price holds strong then you have investors up to that point. One rule I have is when a stock thread dies the price it maintains is the support the stock has by investors. Also look for accumulation at that price range for selling vs buying.
The key points to fundamental investing is buy-low as you possibly can and sell-high, which is easier said than done, or buy and wait patiently to sell when the stock known about. The key points to day / momentum trading is buy-high sell-higher, or sell-quick and minimize losses. Well that was the principal but now we have the internet with front runners day traders. Front running gurus do the same thing everyone has, sooner or later grab one that tanks and kills everyone. That starts the fighting and loss of credibility. Also the emotional egos will explode. Many a good researcher has gotten stuck by a stock that no one likes. They get black eyes from these picks. Funny that no matter how many successful picks you make in a row one bad one and you are hated. This is a hazard on the OTC arena.
Gary Swancey
to be continued |
