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Technology Stocks : Rambus (RMBS) - Eagle or Penguin -- Ignore unavailable to you. Want to Upgrade?

To: richard surckla who wrote (43405)	6/5/2000 12:57:00 AM
From: Bilow	Read Replies (2) \| Respond to of 93625

Hi richard suckla; Re learning trading techniques by trading small... Most of my trades are much larger, but the way I learn new techniques is by making lots of very small trades. When I get enough statistics with a new technique, then and only then will I risk money with it. Until then, I play with such small amounts of money that it is entirely an intellectual exercise, with zero emotional content, not a trip to Las Vegas. There are people who believe themselves to be God's gift to the stock market, and who feel that they don't need to practice in order to be good. The market is a thing where a few lucky breaks can make up for a lot of stupidity, and there are a hordes of people who are now taking ridiculously large chances on positions that they know nothing about. This stock undoubtedly attracts lots of them. Humans become proficient by practice. The fighter pilot who doesn't practice away from the front lines gets shot down first. The surgeon who doesn't practice on cadavers and animals kills people as he learns. The policeman who doesn't practice at the gun range shoots the wrong person. Practice makes perfect. Failure to practice in a risky business like the stock market is an indication of an overly confident person. (Incidentally, the way that you can most easily identify a pathological gambler's stock account is that you will find only the most volatile stocks in it, with most of the position tied up in one or two stocks. The gambler's attitude is that he just has to make a few more triples and he will have enough money and will take it off the table. If someone reading this feels that this description fits him, he should consider exiting the market and putting his money in mutual funds. I heard talk somewhere of a 100x100 club in AMD. These guys had put 100% of their money into AMD, and 100% margined. They are also clearly 100% unable to manage their money, though they've done rather well recently.) I don't see any reason to risk large amounts of money in order to learn, and I don't think that I have already learned everything about trading. So I still take small positions when I want to practice something. I save the big positions for the situations that I am familiar and skilled at. Here I was buying the local bottom on MSFT a few weeks ago, for instance: I bought MSFT this AM, at 65 15/16 #reply-13488649 The above trade was entered after MSFT made a big move down on large volume, and then started up again (i.e. panic bottom). That is a great time to buy for a short term pop, and that is exactly what the stock did. I will only put real money at risk when I see a situation that I have noticed has a positive average return. Panic bottoms are one of those. Most people are unable to identify very many different situations with a stock. I see many different patterns, but I only trade a relatively small number of setups. (Fortunately, there are 1000s of stocks.) I am always looking for new setups, and that is what small trades are all about. To me, trading is a deep subject, one that requires years and years to get only incomplete mastery of. This long bull market has been very easy on the simple long investor, and has convinced a lot of people that they are stock market geniuses. Someday they will be brought back to earth, but not anytime soon, I hope. Rambus has gone up something like 6x in a few months. The runup was due to short covering. I like to play long on stocks with high short interest, which is why I won't short this stock, there is too great a chance of another short covering rally. If RMBS gets to $225, I would expect to see shorts bidding it up quite a bit higher. But that also means that the current price is a great price to get short at, much better than getting short at $200, where the stock would have to rise $25 before you got to that natural short covering price. Most of the secret of good trading is entry at prices close to natural stop losses, by the way. The big move up in RMBS was kind of slow as short covering rallies go. One that I played last year went up 10x in 48 hours, about two orders of magnitude faster than RMBS. The professional shorts were happy to get short after the first run up by 2x in 24 hours, but I went long and warned them that there was a pretty good chance that they would get slaughtered the next day. In fact, the next day the stock went up a further 5x, for a total movement of 10x in 2 days. Here I am gloating: "Hi lifeisgood; Thanks for responding to my post suggesting that ADSP could go to $30 per share. Obviously, I underestimated considerably." #reply-12110340 But the basic fact is that my trading ability has nothing at all to do with my ability to discuss memory systems. My theory is that, when the longs have to face particularly devastating technical critiques of RDRAM, they change the subject to anything other than RDRAM. Ad hominem attacks are what they use when they just don't have anything to say, and just want to muddy the water. The next stage will be suggestions that I haven't published any industry articles, but it is pointless to constantly respond to this stuff. So I wait, and every now and then put something like this out. -- Carl