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Pastimes : Learning To Invest Correctly - A Shared Experience -- Ignore unavailable to you. Want to Upgrade?

To: Reginald Middleton who wrote (93)	7/26/1998 1:59:00 PM
From: BBG	Read Replies (1) \| Respond to of 253

Hello everyone... I've just spent the last few minutes going through the posts on this thread... Very interesting... I wish I had had the luxury of asking questions like this when I began investing 3 years ago... I've enjoyed the debate between the Fundamentalists and the TA people... I invest primarily on fundamentals and stocks "in the news"... but have been paper trading a very interesting system based strictly on TA. The system belongs to Gary B. Smith who writes about it and answers questions from subscribers at THE STREET.COM (TSC). Basically the system consists of choosing candidates from IBD's daily stock charts that highlight stocks that are breaking out of congestion on high volume and have relative strength ratios of 80 or greater. Gary sets hard stops of $2 gain and $3 loss... He reports around 70% winners to losers ratio... I've been paper trading it for 3 months with 60/40 success (but I'm getting better)... I like the system because it takes all of the emotion and guess work out of investing, some may hate it for the same reasons... It doesn't take much time to research and place your trades... If any of you are interested PM me and I'll provide more details... Since it's Sunday and it's cold and raining outside I thought I would list some of my general investing rules of thumb... Over the last 3 years I have learned the following: - Don't invest money you can't afford to lose or at least can't afford to leave untouched for "reasonable" period of time (one yr.?) - The best investment you can make is to pay off any short term high interest debt before buying stocks. - Paper trade for at least 3 months before jumping in for real... - Stay away from "tips", and BB stocks... - Develop a strategy and stick with it... My "strategy" is still a work in progress but it lies somewhere between Buy & Hold no matter what happens and a "mid term take profits / cut losses" strategy... If I have a stock that has run up 50 - 100% ala MSFT, DELL, CSCO, LU, IBM, AOL, etc... I will usually take my profits and wait for a dip to buy the same companies back... I am trying to make myself cut my losses on any stock that is down 10%... This is tough because invariably, as soon as I sell, the stock heads up and causes me much anguish. What I'm learning though is that it's not as bad as the anguish caused by a stock I own going down and down and down some more ala CPQ (I bought at $33 and watched it cave to $23 over the next month) - NEVER FALL IN LOVE WITH A STOCK OR COMPANY... My biggest investing mistake by far was to stay with IOMEGA and watch my substantial gain turn into a big loss... I stayed with the stock primarily because I liked the company and it's products and WANTED to believe that this great little company just couldn't fail... as CRAMER likes to say WRONG!!! I've also held "glamor" companies (KO, IBM, MSFT's, DELL, etc...) too long in some cases because it was just fun and exciting to own these companies... - Read everything you can get your hands / eyes on... Watch CNBC... Take courses... Ask questions... Not just about particular stocks but about the market in general, the economy, details related to "trading", etc... - Be very wary of setting "Stop Loss Limit Orders"... If you're trying to protect profits or lock in a gain I think it is best to just go ahead and sell at the market... IMHO "Stop Loss Limits" are only good to protect against a catastrophic drop in a stock... Set them carefully... - Keep good records of your trading history and patterns. Study your actions frequently... Good data will red flag bad habits and highlight the good things you've done... With enough time and data, patterns will come to the surface that you can learn from... - I firmly believe that to be a successful investor you must have a passion for business, the market and everything associated with "Investing"... i.e. researching, trading, building a portfolio, etc... If it's a "hobby" or a substitute for Las Vegas or something you "dabble" in for fun it will chew you up and spit you out... If you don't have the passion you're better off putting all of your money in your 401K plan or a basket of mutual funds and staying away from individual stocks... CIAO... JD