I had promised that I was going to start my own thread regarding stock investments and the markets. So many things have happened since last time I was here and I really do not feel like sharing my knowledge. But a promise is a promise and there have been few people that have emailed me and supported me.

This thread will deal with investing in the stock markets. I will not discuss individual stocks but discuss ETFs like SPY, DIA, IWM and QQQQ. The one good thing about trading ETFs compared to individual stocks is the the ETFs provide instant diversification among similar companies within the same sector.

I will post more as we go along, regarding entry-price, profit-target and stop-losses. I do not think that any ETF is good or bad. It is good only if I'm making money and bad if I'm losig money.

If you have not been in the market so far, please read this as an information piece only rather than my recommendations. There is risk involved and you should know how much risk to take on any position.

Any suggestations, comments and criticisms are welcome as long as it is market related. If this thread gets out of hand and we start discussing off-topics, I'll stop posting.

Have a happy new year!!!! May 2007 bring you and your family lots of joys and riches.

Well actually most of our own money is invested in it too. So if we lose, we don't get paid and lose our money too. If we make money we get a nice return on our money and get paid by the investors.

I'm almost done with my MBA too. Did not want to go to school to get it because I was doing well financially but it wasn't enough for my parents. I know as soon as I finish my MBA, they'll talk about Phd. They'd rather have a poor child with a Phd than a rich child with MBA. Anyway, they are the greatest parents.

Well said. I agree with you. Your parents must be really proud of you!!!

Alright, let's talk market now. This week, I was a little worried because as soon as S&P hit 1450, the sellers would come out. Today we were able to close above 1450, now there is one last resistance to break at 1462 and that might take some time. If we break that another 5% gain should be easy,

I know some of you guys have been buying when I mentioned it here. So far it is working but I would like you to focus on WHY we are buying than WHAT we are buying. Ask questions. Sonner or later I'm going to stop posting so I'd like you to be prepared and be able to understand the market behavior. Please read the books that I have mentioned here. Buy those books and read it few times, i promise that will be a good investment.

I see the market as a multi-dimensional puzzle where many of the variables are uncertain. By the time we figure out all the variables, it will be too late. In this case what should you do? It is all a matter of taking calculated risk. I will post more on how to bet in my next post sometimes over the weekend.

Could you guys suggest which online trading is reliable and has low trading fee?

There are so many different strategies that people use to trade, for indiividual trader it is necessary to find 1 strategy and master it. You can select few stocks and concentrate on that. Here is 1 strategy that I think is fairly easy and has a decent return.

Find stocks that had the largest 1 day % gain. Here is a link.
http://finance.yahoo.com/gainers?e=us

Once you have the stocks, narrow it down to the ones that have been beaten up ie. trading near their lows. Now you need to find 3 things:
Entry Price, Stop Price(where you'll get out if you are wrong) and Target Price. We'll use the target price to determine the risk/reward ratio and to take partial profits.

Target price will be the prevoius support before it broke down.
Stop loss will be few points below the low.

For example: A stock fell down from 16 to 8 and traded around 8 for a while, then it came down to $3. Yesterday, the stock went up 20% and closed at $3.60. Should you buy it now or wait for it to move higher before you buy or do you want the stock to come down to $3 before buying? What if it does not come down to $3? It is necessary to determine the risk/reward ratio. Here is how you do it.

Stop price = $2.85 because $3 was the previous low and if it goes down 5% from that point, we'll take our loss.

Target Price: $8 which is the previous support.

Range: $8 - $2.85 = 5.15
Now we divide the range by 4(I'll tell the reason why later).

5.15/4 = 1.30 rounded up. Now add this number to your stop loss price.

$2.85 + $1.30 = 4.15. So as long as the stock is below $4.15, it is okay to buy.

What we are looking to do is buy at a price where our risk to reward ratio is atleat 3.

What if the Target price is $5.

Range: $5 - $2.85 = $2.15.
Divide the range by 4.

2.15 / 4 = 0.55 rounded up.

Entry Price = 2.85 + 0.55 = $3.4. In this case since the actual stock went up to $3.60, wait for the price to come down to $3.40 or lower or pass on that trade.

Aman:

It all depends on the frequency and your trading style. I have heard Sccottrade and Ameritrade are decent. If you are employed and your employer offers 401K start with that before jumping in the online trading. Lots of people have gone in with the hope of big riches and has returned empty handed. I'm NOT discouraging you, because I'll never do that but it is important to understand what you are getting into.

In the above example, If the market is strong, I'll exit 1/2 my positions at $8 and leave the other half there and see if it could go higher. If the market conditions change i.e few 1% true selling days in the indexes, then I'll get out at whateve price the stock is currently trading.

Hi Eminitrader,
I've found your your thread recently and I've been following ever since. I went back and read as much as I could. Also, ordered a book by Gary Smith (your recommendation). Now you can see the pattern -- a believer -- I think you know what you're talking about.

I do not have lot of dough to play with. My 401K is tied with a company who only has 8 mutual funds. My Roth IRA is with Fidelity -- I have control over this. I'm doing very good with this account. I have FOCPX, FLATX, and VDE. FOCPX is dong well. FLATX was up 30% last year (since I acquired it to the end of the year 06). I made 20% on VDE by selling and buying it a couple of times.

This year, FLATX is up about 10%, VDE is about 12% up since I purchaged it ( purchase price $82).

A non retirement account at etrade has ZRAN and it is up 30% since I purchased it 2 and half months ago.

Actually I am doing pretty well -- but I can tell you this that I am just getting lucky so far.

Please explain me a few things.
What is your real goal? Are we supposed to buy and sell the same day? Or hold for a week -- or for 10% gain? How about a fund which is up 5% and stays there for a while? How long do we wait for?

Thanks.

E ji,

nice to learn some more about you . Earlier I pondered on your music taste, now I get to know a little more of you other than your detest for typos (disclipline) and short-term experience w/ Hedge funds as well as moving onto liberation from biweekly pay chekcks.

Also, your patience on taking mud slinged at you earlier on the post, by year start, is more than laudable. Surely a sign of what you want to is what you want. Surely a potent competitive formula that is bound to make even a better leader of you in years to come.

Back to Market:

April and May are two good months for Wall St, as loads of tax monies start flowing in. That is historically speaking. I have not seen much of activity for this year's April. May be other factors such as weather and oil prices play their part, hai na? Also, the money supply as you would say.

I would put some solid watch for Stem Cell sector. I know when organ donation is okay, then this sud be okay sooner or later. I know I will have close watch on STEM, ASTM, CBLI, GERN in that sector.

CYPB is indeed a watch too. We saw what went on with SIGA last Friday. Ani, also there are quite a bit of things on pipe line in healthcare sector, where entry point is very low, possibly in 5 bucks or 10 bucks region.

When the bell rings on Monday, I shall come up with some more of my solidified uptake on the market.

You have a great weekend.

Best~!

-B

Watched In Pursuit of Happyness. NO TYPO here, hah ah!... ani learnt how difficult internships are. I kinda thought about you. Tell me more when you have down time.

Psycho: I think you are doing it right.

Regarding your questions. My goal was to show people that people should look into stock market to make money. 8 - 5 jobs will get you a paycheck but not financial security unless you are in the top 10% in the company. No other goals, I'm not doing this for money or recognition since we are in an anynomous message board and no one knows me here personally.

Regarding my picks that I mention here are NOT supposed to be day-trades. Those are supposed to be held a little longer unless the price goes down below a pre-deteermined price where we wre going to take our loss.

If I get a nice quick return in just 1-3 days, I take half of the money and see how high the other half can go. I always take profits on individual stocks. It is the ETFs that I hold for a long-time. In my own trading we apply multiple strategies.

Plus everyone need to define their own comfort level. The key is to identify the major trend and ride it as long as you can. If you want to stop on the way that is fine as long as you get back in.

Gary Smith's book is an intersting read.

Bri: Bio-techs are showing some strength here. The only bad thing is that most of them do not have any earnings and depend a lot on their products. It is very speculative and should be bought in small amounts on a pullback.

How do you define pullback? Go to www.clearstation.com and type in the symbol. Check the Stochastic. If it is below 70, it is a pullback. Then look at MACD histogram, it should not be lower than that was made in the previous pullback. Then you can put that stock in the wait list and watch it in the morning. If it trades above the half-hour high, then buy it. Run an analysis to see if there is a 3:1 return. If so you're good to go.

All these will work when we are in an uptrend like we are in now. So it is necessary to determine the direction of the long-term trend before we do anything. I have mentioned how I determine the long-term trend in my previous posts.

i think this thread is great if people see the importance to it..great job eminitrader. well i have been in stocks and options for about 7 years now and by far it has been the best investment ever. i lost a lot when i started cause like warren buffett says " diversify is the hedge to ignorance". i was buying great stocks but at the wrong time withour really not reading the chart. it was like driving my car but without a windshield, i think educating yourself in the market is what everyone should do before investing in stocks than rather buying what mr. Jim Cramer and the media tells you to buy. eminitrader the only difference between your investing style and mine is that i try not to invest on stocks that are less than 20 bucks. i use 10 criteria to select stocks and if they all meet my selections than i buy it, though i always use trailing stops and exit points no matter how good or bad the stock may seem. well once again great job and good luck ...

WOW, we are getting more and more people here now which is great but kinda sucks because I'm ready to leave for the summer. Wednesday is my last day here. We should definately start again in mid July. I'm exiting out of all my positions this week, either on Monday or Tuesday. I think I have 1 stock for the summer. Will post that later today.

Trader: For investment purposes, I'd like the stock to be atleast $10. This stuff that we are doing here is more for income, so I'm looking for small caps with high beta. That is why I always mention the importance of stops. The other criteria is a pullback and 3:1 risk per return. This way even if we lose 50% of the time we'll come out ahead.

I love that quote from Buffett, it is so true but so taught in Business schools.

One of the questions that people ask is, why are you giving your strategies for free, what is the real motive and as such. I believe those are fair questions. Let me address those one last time.

I look at these strategies as techniques on setting up a pick and roll or playing any other sport. It is nice to know the techniques but that will not take you far ahead. I can read 100 books on playing basketball but Jordan will beat the hell out of me with his legs tied.
What determines the successful is the ability to be patient and discipline to learn and wait for the right opportunity, the ability to come back from defeat, and the courage to take risks and the determination to acheive the goals. All these things has to come from a person within. If you are making money with these, it is because of YOU, if you are not with the same strategy YOU need to work on your shorcomings and master yourself before mastering the strategies. All I'm doing is showing the directions.

I want our community to be strong and influential. We can sit here and complain about how everything is unfair or we can do something about it. Money gets you the power and influence. Once we are financially independent and when we know that we have enough to take care of our family, then the real charity begins.

Bri: Be careful in May, lots of correction have started in May. There was 1 last year, that started the first week of May. There is a saying in Wall St., Sell in May and go away. We are dealing with many uncertain variables and not sure what will happen in the future. It is necessary to be prepared at all times.

Alright guys, my last day here is on Wednesday. I will be back in mid-July. I will be getting out of SIGA here just because I do not want to hold it when I'm gone. You guys decide whether you want to take profits or wait a little longer. I still think it will go to $8+. Biotechs are looking good now.

Here is my pick for the summer. Are you ready????????

JDO.

It was up huge on March 23rd and from that point on it corrected till last Friday and was up 25+%. It should not go back down again if my analysis is correct. I will take my loss if it goes down to $1.40.

Besides JDO, I'm not buying anything here. The first half of the year so far was very good. Hoping to keep the momentum going in the second half.

GOOD LUCK to you all.

Target on this is $7.50+.

If I find anything good in the next 2 days, I'll post although I won't be buying it.

Let's do some math here.

Stop Price: $1.40
Target: $7.50

Range: $6.10 rounded down to $6.00

Buy below Price: Range/4 + Stop Price
= 1.5 + 1.4 = $2.9

As long as it is below $2.90, it is okay to buy.

So your maximum potential loss is $1.5 per share if you were to buy at $2.90.

If you want to risk $150 on this then buy 100 shares, for $300 risk buy 200 shares and so forth. If you cannot risk atleast $150, then save some money and come back. If in the morning it opens above $3.00 and doesnot come back to $2.90, then pass on this trade and wait for another opportunity.

This thread seems to be getting more interesting than Jim Cramer's Mad money

Prachand Samsher ji,

yes it is getting popular, and duly so, for one reason. And that is that someone started it all in "good faith."

when you have purpose to serve, and that too without much greed interlaced into it, it will always fly.

I would like to thank E ji, for making this all happen.

Making monies, I care less, learning the logic and potential to make some in the future, I care much.

Best~!

-B

E ji,
here we go on JDO.

http://finance.google.com/finance?q=jdo

btw, I would say that one cud entry this one somewhere around 1.90 ish if one is patient enff.

Anyways, long on this one will definitely yield. How long could be a good question? Kasso?

I know you are betting on the summer gas-prices, am I right?

Best!

-B