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Microcap & Penny Stocks : Trading 101 -- Ignore unavailable to you. Want to Upgrade?

To: Ga Bard who wrote (138)	5/2/1998 9:46:00 PM
From: Ga Bard	Read Replies (2) \| Respond to of 406

OTC:BB Momentum / Day Trading vs. Long / Short Term Investing Part 2 Now everyone wishes they had or wants to own a major large position in a large corporation with long track records of growth, earnings, dividends, recognition (Iomega) etc. Hindsight is always 20/20 I know you all have heard. So how do you find such as these? It is in doing of solid research and verification. The next major problem is how to you accumulate it in the time frame of maturity? Some day trading and try to catch the wave. Liquidation of stocks once and moving stale money around. Making a profit and accumulating the long and finding other winners in the process. BTSing is a way of capitalizing profits. Of course e day trading is also. If you are successful at day trading for quick profit you can get a name and a following. Just be careful because it is short lived if you are careless in your picks. With out a following day trading is tuff. The key point here is the sheep or the herd as it is called. I have discovered a lot of the larger investment newsletters mention OTC stocks and openly discuss the fundamentals. People quickly jump in and later find out the stock mentioned usually doesn't have sound fundamentals after all. Some newsletters are great at uncovering sleepers, just don't be fooled by all the fundamental jargon. Research it anyway and try to verify the information. Just be careful not to confuse fundamentals with speculations and expectations you could be buying into a momentum and getting caught at the top. As we all have seen or will see many stocks with a supposedly great potential go nowhere at all because nobody sees the potential. Trust we all have and we all will own a few of those. Suddenly the internet roar goes up and you read all the wonder things people are saying. You buy in thinking all right this is the one. BOOM!!! The stock plummets and held on believe in the rhetoric. You were lazy and did not spend the time to even make a phone call. Well the internet excitement is gone, momentum has dried up and the stock falls lower and lower on low volume. Before your very eyes the wonderful potentially sound fundamental stock now in facts become a long term hold. Why does it fall because to a pure momentum / day trader it dead money laying there. Quickly they cut their losses and move on to the next prey. One thing about trading that you need to understand are always going to be sellers but not always buyers. Momentum / day traders buy and sell based on volume alerts to. Here is two rules savvy momentum . day traders live by: Rule 1 If it is not going down, buy. Rule 2 If it is not going up, sell. Believe it or not it is that simple. If you get in with $2000.00 conservatively and it goes up 10% you get out with a profit of 200 bucks. Have you ever watched a stock trading millions of shares and at the end of the day the share price is unchanged? That is normal and the problem is when the volume will dries up the stock typically will sell off. However if a stock stabilizes and then volume does not change much that is a great sign. That is considered accumulation. the longer this event happens to more comfortable you feel that investors are buying in because the momentum / day traders are getting out. Broker are known to just park at a level and buy all they can get. Momentum / day traders love low priced stocks, with around 10 million shares outstanding, because that will assist them in getting the herd to follow and it not tick up too fast. However it will run up quickly on a good story or rumor whether or not it is true. Take the profits and see ya later. Just remember these type of runs NO one and I mean no one can guess what they will do. After people get nailed at the top they learn not to get into one that is moving and MOST of all do not chase it more than 20% because you stand the chance of getting caught. A lot of small float stocks have alerts by day . momentum traders at 500K to 1M shares traded and a good up tick (UT). Quickly they are in and ride the wave while shouting to everyone. then come the shark feeding frenzy. Only to in some cases to be eaten by the bigger sharks at the bottom. Who fault is that? The ones who are lazy and do not study Trading Dynamics. They have no one to blame but themselves. Of course someone has got to be blamed for their stupid mistake. The bottomline is if you want to momentum / day trade have something solid that in the next year will make back any losses you may incur during the learning experience. Also consider momentum / day trading pay a lot of commissions plus owe a lot of income tax or carry forward losses which I think is limited. Also for somewhat successful momentum / day traders they are paying the max to in taxes for short term capital gains. This is another overlooked hazard. Whereas, investors pay little commissions and in the long term they do not pay capital gain tax till some years later. Plus they pay a small percent in taxes. Also the mental stress of momentum day trading is very upsetting at times. Checking the news constantly, worrying if they messed up, watching the tick, tick, tick or each trade and losing sleep at night worrying about what the stock is going to do. Investors on the other hand check the stock daily looking for accumulation, waiting for the defining process of the company, and sleep very well at night. They have the comfort of knowing they have made a solid investment decision. The investor can have a life and the momentum / day traders is constantly looking for a quick clue or story they can capitalize on to get rich quick. The primary difference is the majority of the momentum / day traders will make less money than the patient investor over a years time. Not to mention the tax break. Nor the line item trading log that has to be submitted to the IRS. However, the momentum day trader keeps looking for a following of sheep while the patient investor just patiently waits. Frantic versus Patience. Professional gamblers are very patience while the novice get rich quick typically loose their shirts. Gary Swancey