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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: Marty Rubin who wrote (17683)	4/1/1998 6:06:00 PM
From: Marty Rubin	Respond to of 50167

15:25 ET ***** (http://www.briefing.com/) DAYTRADER: In the daytrading game you have those who take calculated risks and those who simply act without thinkin -- blinded by the desire to make the fast buck. An example of the individual taking a calculated risk is the trader who enters a stock (let's say for example AGISS Corp) before news of the company's latest achievement has been widely-circulated. If that trader buys the stock at $2 and the bid is $1.875 a share, on improving volume, the risk is minimal, while the upside is potentially grand. On the other side of the coin is the trader who does not take the proper precautions before attempting to enter a fast-moving stock. What are those precautions: 1) know in advance the most you will ultimately pay for the stock by placing a limit-order. If desperate to get into the issue, place the limit well above the level the stock is trading at the time of placing the order. The stock may jump through your limit price, but at least you're not stuck holding a position at a price that it will be virtually impossible to walk away from with a profit. For example, a market order on AGISS could have potentially executed at $5. Yea, it would have been a rip-off, but that is what the market-makers were attempting to sell it for; 2) if the spread is too wide, stay away. A $1.50 bid/ask spread on a stock trading at $3 is obviously too wide. Even before transaction costs, you could find yourself in the hole 50%. Moreover, if the bid has fallen that far from the prevailing price, it typically means that you are too late anyway -- the selling has already started and the market-makers are trying to hide behind each other. Toward the end of AGISS' huge run, the market was being made at less than 50 cents for those looking to unload the shares. While it is difficult to maintain composure when a stock is crashing, attempting to get out at "any price," by placing a market order, could be disastrous. In your mind "any price" could mean as low as $1.25 per share, not 47 cents; 3) before placing an order, think about how much you are willing to lose and how much you could potentially lose. If the stock is already up 150% by the time you get around to buying it, be prepared to potentially lose half your money, or more. Those who were buying AGISS at $3 and sold at $1.25, took a 58% hit in a matter of minutes; 4) only put big money on stocks that you are familiar with. This is not to say you need to have traded the stock before, but it definitely helps if you have traded the situation before. Someone accustomed to trading oil drillers all day shouldn't be dropping a meaningful chunk of their portfolio into a "Year 2000," bulletin-board play. Remember, discipline is the primary difference between those who make serious money, with only a few losing trades out of every ten, and those who are forever spinning their wheels. Copyright c 1998 Charter Media, Inc. All rights reserved.