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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Richard Estes who wrote (2508)	8/7/1999 12:39:00 PM
From: Bilow	Respond to of 18137

Hi Richard Estes; Great post! Regarding getting short due to bad political news that really doesn't have anything much to do with the company... Take a look at what happened to the market when Reagan or Kennedy was shot. If a person is trading for the very long term, these short term fluctuations are not of a concern. I imagine that they were buying from me, and were very happy to get a price reduction. Since we have different time scales, it is possible for us both to make money. But the shorter one's time scale, the less important the true "value" of a stock (say in terms of net present value of risk adjusted rate of return of dividends or growth in book value), and the more important what other people are willing to pay for it. People prefer cash when they don't know what is going on, and there are a lot more longs than there are shorts. So in general, confusing news is bad for stocks. My favorite rule on stock trading is: Try to avoid panic. But if you cannot help but panic, try to do it before everybody else does... It is possible to play this rule, but only if you have fingers that are very fast. The fact is that to survive as a scalper, you pretty much have to do things with absolutely no delay whatsoever. In this sense, the emotional reaction to news is the correct one to take. It takes quite a bit of practice to get to the point where you trust your urge to do the right thing instantaneously. This is something I am still working on, particularly when those low-priced fundamental value stocks print new 52-week lows. (Check out OROA's action yesterday, for instance, compared to its fundamentals.) My guess is that there were people who bought at the low and made money going long. But they were buying at the same time that I was covering my short. The losers were the ones who were slow to take flight. -- Carl