Stock market? Are you any good at it???

Basically kinda new to the idea of “buying and investing in stocks” in the stock market? First question maybe: What’s the most money you’ve ever invested in any such sort of “stocks” and also the opposite: What’s the most money you’ve ever received back from the stock market when you made your investment? And also how do you know when to “Sell/Trade” your stocks?? Like said I’ll take any kind of “educational tips/pointers” I can if you guys know any “tips/tricks” on how to “play” the stock market?? Thank you!!!

 

Nope



Longterm or shortterm?.......options /crypto/ect.........

If you really want to invest, be smart and inform yourself,i dont think Hipforums is the place for real advice.

Mzzls

 

Yeah, no one on HipForums is going to know anything about the stock market! Your wasting your time expecting anything here...

Oh wait a minute-----I had a long career in the stock market. I was an analyst, I traded, I advised active traders, etc. etc. etc. I even had a stock market newsletter for a while that I think was pretty accurate----but it was free and so I don't think people really valued it or followed it as they should have.

To your first question---I assume you are talking about one stock as opposed to one portfolio. I used to trade a single stock, a mortgage insurance company, sometimes moving as much as hundreds of thousands of dollars in and out of it in single trades. I would trade it around a price of 3/share and sell it as it approached 4, and go back and forth at weeks at a time. sometimes I would sell on a 25 cent move, or so, other times on maybe 75 cents or more. I loved this stock because it was mainly traded by institutional investors. That meant that there were a lot of big trades everyday, so I could easily buy and sell 100,000 shares or more without moving the price. It was having issues with its earnings as this was during the housing crisis but I knew the problems were temporary. It had a great chart. I knew the stock was going to go to $10 one day, and it did. Unfortunately, when you take a hippie (me) and a Filipina wife who is used to money, and who has her own spontaneous and a bit irresponsible hippie mindset (even if she does not admit to it) and who insisted on designer everything, add in a few family incidents (like an uninsured child having an accident or two), hospital bills, and you love to travel and do all that other fun stuff, and let taxes pile up, and you collect art----you tend to not be able to keep all of that money...

As to your second question, I don't remember the biggest amount I gained. I made quite a bit off of that mortgage insurance company. The first time I remember making quick big money was when I was an analyst in Tokyo in the 80's. There was an American-Chinese guy who became a good friend with me. He had fallen in love with the daughter of a wealthy Japanese businessman and moved to Tokyo and joined the same investment bank I worked at---mainly to keep his American contacts and a professional desk to trade through. He bragged that he was the biggest Put Option seller in America---and I'm sure he was. His trading on his account was always raising red flags at the firm. The truth is, he was in the pipeline for inside information that Boesky was a part of. But he was smart about it. He only traded on inside information when he could actually point to news articles which gave enough information that he could say----this is why I sold those puts. So one day some news came out, and he asked if I wanted to trade too. Since we were in Tokyo we went out for dinner and then headed back about 10 pm and sat in a corner of the trading room for a while. (It was a 24 hour trading room but at night there weren't too many traders, as most trades were done in the Japanese and Asian markets.) I think we put our trades in so they would trade at New York market open, selling a whole bunch of puts on a stock that was just going into play. I don't even remember what it was. I forget but I think market open in New York was like 11 pm or midnight our time. I went out and bought some Kirin beer for us to drink which I brought back with me. We sat and drank for a few hours, talked abut this and that, and suddenly the stock started moving up sharply. It was incredible watching it and buying back those puts about 4 am with a profit of $80,000. I went home, a bit too excited to sleep, called in sick the following morning, but the sun was pretty high before I finally fell asleep.

When it comes to picking stocks there are two main smart ways of doing it. The first is to use fundamental analysis---the financial strength of the company, its market, its earnings and growth prospects, and its valuation, the economy, and all that kind of stuff. As an analyst, this is what I was required to analyze and base my recommendations on. My target customer of the firm was not individual investors though my reports probably were shared with them if some broker liked my recommendation or an investor asked what information there was on a company or industry I covered. My target customer was institutional investors----I was on the sell-side (the investment bank a.k.a. brokerage firm), and if I was going to have any customer contact, it was usually with the buy-side analyst who worked for the institutional investor (mutual funds, money managers, insurance companies, etc.) I did see fund managers at times, but I, as a sell-side analyst, usually met buy-side analysts. This system created a due-diligence that protected everyone. For example, let's say you buy a mutual fund, and they happened to buy a large position in a company that suddenly tanked and the fund lost a lot of money. Because, after all, no one knows the future. If you knew why the value of your fund went down, you might get angry and sue the mutual fund. But you wouldn't get anywhere. Because the mutual fund would bring out their buy-side analyst, and he would say----I got the research of all these sell-side analysts and I did my own research and based on all this information, I recommended it as a buy. So then if the attorneys tried to say, well why did the sell-side analysts say this, and they brought me in, then I would say, I did all this sound research, visited the company, talked with the CEO and CFO, and have all these years of research I have accumulated and tabulated, of not only this company, but the others in its industry and the industry as a whole and based on those forecasts and information that is why I recommended it.

The system is pretty effective at protecting companies and even making sound investments. It sometimes breaks down as in the case of Enron, where the debt departments of a number of investment banks had a real good money making thing going on and 'told' the analysts what recommendations they wanted them to make. As far as investing, fundamental analysis is very good for long term investments, big picture things and can be good to pick stocks. But it has its problems. It is not very good at telling you exactly when to buy or sell. and as an individual investor you will probably not have the latest information that the analyst will have---who keeps up with all the news, and talks regularly to the CEO and CFO, etc. Likewise, if you hear the news or analyze the balance sheet and income statement, that information is probably already baked into the stock price. What is important is not what has just happened, but what the future brings. And if you are good with numbers, or know some tricks (like the old Dupont Method or Dupont Model), you can certainly make money. And you might even spot where the market is not correctly valuing a company and make money from that. But another big problem is that you can have stocks with great financials and prospects, but don't move at all, or even drop in price, while other stocks that have horrible financials can skyrocket.

The second way is to use the charts--technical analysis. If you can do that, it doesn't matter who you are----everyone sees the same chart. Well, some people get charts that are delayed, but anyone can get an up to date chart. Charts are great for timing, they tell if a stock is a likely buy or not, regardless of how the fundamentals are or what you know about the company. There is no secrets with the chart---they tell it like it is----the stock is either going up or down. The first stock charts were designed to track the old stock pools and stock manipulators. If you read any old books on the subject from the 1920's or earlier (which is how I first learned) they talk about accumulation and distribution. Interesting enough, the theories hold true whether there are manipulators or just people buying and selling.

In this regard, the stock market is broken down into those who believe fundamentals are better and those who believe technicals are better. Most people focus on fundamentals, because it seems more legitimate than a bunch of lines on a piece of paper. I have mentioned numerous times on this forum that I was a very good analyst. In fact, I like to point out that I had to be good because those were the 'Dress for Success' days and I still usually had my long hair, so I had to be good. Now it wasn't because I was an amazing number cruncher or had a crystal ball (actually I did buy a good sized Baccarat crystal ball and kept it on my desk because of people that would say, 'Well, none of us have a crystal ball. I've also kept real natural crystal balls on my desk.') I was a great stock picker because I chose which companies I'd cover, and when to put out a buy or sell, by their charts. Officially I had to justify it by fundamentals. But that is how I picked them. That is also how I always traded myself

So my advice to anyone who wants to trade or invest: learn how to read charts. And it doesn't matter what you want to invest in---stocks, mutual funds, bonds, crypto, commodities, or what your time frame, charts are very important. Many people think charts are not good for long term investments but the long term charts are the most reliable. All you really need to learn are three basic fundamentals: 1.) Trend and Trend Lines, 2.) Support and Resistance, and 3.) Moving Averages. And all three of these things are mirrors to each other, or different ways of seeing the same things. Everything else in technical analysis is based on these three things (and it is surprising that most books or classes do not emphasize it or teach it that way.

One thing to understand is that no one knows what the future will bring, and anything can happen. This includes the experts. People think they have some kind of inside scoop, and they know better. But they don't---in fact, they really should know key things about market turns and yet even if some of them do, none of them act accordingly. So if someone tells you---those guys on CNBC are just misleading you. They are making you buy when they are selling----NO THAT IS NOT TRUE. They are telling you exactly what they think, which is very important to know, because they are demonstrating by their beliefs and feelings exactly what the psychology of the market is, and if you understand how to use that, you will invest better than just about anyone of them. Trading against market psychology is incredibly easy, but it is very hard for most people to do----because they themselves are caught up in that same psychology.

Anyway, I need to get to bed, so I will write more tomorrow---rules to follow, and expand more on this last bit about market psychology.

 

So about market psychology: In my early days of working in the stock market, before I was an analyst I was a broker for a Japanese firm. I made friends with a guy who was a trader, and he knew I planned to only work in a Japanese firm for a year or two, his English was really good, and that was his plan too. He worked on an institutional desk, and being that I was the very first foreigner to work for a Japanese firm, the company wanted me to develop a foreign customer base. One night we went out drinking, and he mentioned that he noticed how, before and even as the market peaks, everyone is buying. And that before and as the market bottoms, everyone is selling. I agreed and told him that this is textbook stock market activity. He agreed, but he said no one pays attention to it and he thought we could use it to identify tops and bottoms. So we started comparing notes.

We discovered that we could know that the market was going to peak when everyone was the most bullish over a period of a week to several weeks. and that the market was going to bottom when the bearishness peaked for one day. It was amazing how well this worked. We were able to spot the top and the bottom of the market by these spikes in sentiment. In those days our communication, especially after we both went to foreign investment banks, was with institutional investors, traders, and other professionals. So I did not know how well it would work for, say, a retail broker.

I did find out years later when I returned to the States and worked for a retail broker here. And yes, people were just as bullish and bearish meaning that I could always spot the top and bottom. I remember someone arguing with me, at a market top---and I was trying to warn them---No one knows when the market will top. I told her that she is right, which is why it is so easy to spot the top. As I had already told her, everyone is buying. The professionals, the little people, everyone is bullish, and that is how you know. You have to get a feel for when this activity is peaking. She didn't believe me and within a few days she was still in the market as it crashed. What I did not have at this time, being on the retail side, is an inside into the institutional side. That is how I learned the true value of programs like CNBC. I would have an hour long drive into work each day, especially in the morning rush hour traffic, and I had XM Satellite to listen to CNBC----catching most of the hour before market open and maybe 10-15 minutes after it opened (I live 2 hours behind New York---so it opened at 7:00 here). I listened religiously---not to hear what they were recommending, though the news was important---I listened to hear how bullish and bearish they are. What they were feeling. When I stopped working in the stock market, this became my only clue to predicting market turns, and it still worked. Charts helped of course.

In technical analysis there are sentiment indicators---such as the MACD which is very useful. But these indicators do not work anywhere as well as getting a feel for the actual psychology. For one thing, they can get more and more bullish, or bearish, but how much is too much. You really can't tell until after the fact.

There is a saying in Wall Street---a market timer (someone who tries to time the tops and bottoms of a stock or a market) is like a broken clock---even that is right twice a day. In other words, yeah sometimes they are bound to be right. The problem with market timers is everyone is focused on the top----how to get out with all that money. No one ever focuses on the bottom----which is amazing to me, because the major bottoms have the only for-sure cycle I have ever found in the market. And I have traced it back to the 1890's, which is how far back I could go. There are a few that know this. I didn't discover it, but I did verify it for myself. And no one talks about this. I suspect no one has really taken the time to verify and test it as I did.

This is what I'm talking about------the market hits a significant bottom every 4 years. In other words, the bottom of the bear market is every 4 years. Every subsequent low point in the market will be above that bottom, unless we break through it in a future bear market to a lower bottom, as what happened in 2009. To be exact, it is every 4 years give or take about 6 months or a little more. There are only 3 exceptions to this-----1.) the crash of 1929 involved a late bottom, 2.) the crash of 1987 involved a late bottom and, 3.) the crash of 2008 also had a late bottom. Interesting enough, these 3 exceptions were all alike----the market peaked after an extended bull that went past the 4 year bottom mark, they were the 3 biggest crashes in our history, they had much more significant economic impacts, and they represented an extended period of bullishness where the whole country got into it. What is really fascinating is that after each of these exceptions, the market reverted to its original cycle.

For example, the market should have bottomed in 2006, but it didn't bottom till early 2009. The next bottom should have been in 2010, and it did, though many people missed it---it was a one day crash, that was blamed on someone accidentally hitting the wrong button and selling a huge number of shares which tripped computer trading to take place. (It may have been 2011, I forget, but it was within that give or take). Most people missed it entirely, and I was not even sure how well it qualified---but it was a significant bottom----we never got that low again. More importantly, the next bottom was in 2014, then 2018, and so on. The next bottom should be 2026.

What does this mean---well, if you buy on or near that bottom, the market will only go up from there. Between this timing, listening to CNBC to get a feel for the market psychology, and using charts---anybody should be able to identify major market turns. In fact, this is what contrarian investing is really about. Being a contrarian does not mean that you sell when people are buying, and vice versa. That would be stupid. But there is a time, when everyone is buying, that you should be selling, and vice versa.

Another thing to understand, and this is mainly about bull markets, thought there is a similar opposite dynamic in a bear, is the old wall street saying, A bull market climbs a wall of worry. In other words, if people are worried about the economy, market conditions, etc. and a lot of people are afraid the market is going to go down, it will keep going up. Even if these worries are justified, and bring the market into a correction---where it drops for a few weeks to a month or two---but even then, there will be a brief moment of excited optimism before it corrects.

Now if you get professional money management advice---which I think is like riding an elephant in a horse race, o an old jalopy in an F1 race, they will try to rank your risk preference and other similar factors, put it in a cookie-cutter computer program, and then put you in a portfolio of mutual funds and other like investments. A traditional broker will give you tips----in order to make commissions. I would never listen to a commissioned broker. If you want a true stock picking financial advisor----you'll have to turn over a portfolio of tens of millions of dollars. But if you have no inclination to learn how to read charts, or find an investment strategy that is good for you, then a money manager with mutual funds is best. Or simply invest in an index fund or ETF like the S&P 500.

But if you do go with a money manager and you pick up on what I said about market psychology----then there is another old saying in Wall Street----'When the police raid the Cat House, even the piano player gets arrested.' This means that in a bear market just about every stock will go down. Some later than others, but it will reach every stock (There are ETF's that bet on a falling market, so obviously they will rise, but... you know what I mean.) These money managers will tell you how hard it is to time the market, and it is a long term strategy, etc. so they will convince you to hold on. The retail company I worked for in 2007 had that advice all through the crash of 2008. The peak was actually in late December of 2007. I told everyone I talked to----if the market crosses these trend lines--get out. I told this to the financial advisors, but the firm's advice, and theirs, was to hold on because these are long term investments. The trend lines were crossed in the first week of 2008, as the market started coming off of its december highs. The market crashed shortly after that. Imagine everyone that listened to me and got out in early January. And how much money they would have in their portfolios if they got back in during 2009. Of course, those who traded stocks and got out in early January even had a lot of brief opportunities to make a quick buck through out 2008, and if they shorted stocks or invested in short etf's or bought puts they could also have made a lot of money.

But most investors were so upset. Everywhere I heard people saying---my advisor told me to hold on and now look at my portfolio/401k/ investments. Of course, if they are still holding on today---they are making a lot of money and those advisors were right. But if they would have sold and bought back in later-----there would be more millionaires today.

 

After retiring from the bank after almost 40 years as a corporates account manager, a friend of mine (since my school days). simply buys around 10,000 shares in major stable companies a few weeks before the dividend is due. In the weeks that follow, he finds the correct moment to sell them on again. Depending on the markets, he does this about half a dozen times a year.
During the 10 years since he started this, although sometimes quite small, theirs always been a nett gain to supplement his pension.
One of his favorites is Tescos. His knowledge after providing banking service to several of the largest PLC's in the UK obviously helps in him making the best choices.
Have you ever heard of this system of making personal money before. Prior to his retirement it would have broken his terms and conditions while working for the bank.

 

In college I started out in philosophy. When I went to study in Japan I realized that I liked a lifestyle abroad and could not see how philosophy would enable it so I switched to a double major---International business and Finance, the latter of which I stressed the stock market. But my foundation in philosophy and some psychology courses I took really helped me through out my career.

I have a whole career of watching people make mistakes, professionals, nonprofessionals, myself----and these are the rules I think are important. A lot of people in the markets will tell you these rules, but even for them its hard to not break them. My background in philosophy and some psychology validates and explains these rules:

Number one thing----don't fall in love with your stock or investment. It is not your baby. You may have found a great investment and you might be doing really good with it. But the minute you become emotionally attached, you will start missing the warning signs that tell you its time to get out. In fact, you may convince yourself that this is the time to buy more.

The second thing---don't get greedy. For most investors and traders and most investments the money is made, not by buying at the bottom and selling at the top, but by buying and selling on the way up.

Do not panic. Greed and panic are the reasons why most beginning investors buy stocks at a top and sell at a bottom. Again--this is textbook activity. I told you about how I urged people to get out at the end of 2007 and beginning of 2008. A lot of people were coming to me asking what they should do in late 2008, and my advice by then was to hold on---the bottom is coming and things will go up. It'll be scary, but it will come-----the opposite of the old saying about the cat house in Wall Street---A rising tide lifts all ships.

Related to these two rules is that, if you are having financial problems and think that you have to trade to cover your woes---you are already at a psychological disadvantage and are probably even more susceptible to the dangers of greed and panic.

I have some more rules, but my wife is needing me. I'll continue later.

 

Yes there are a few dividend strategies. There are companies that will rise before a dividend---and with 10,000 shares it could be just enough to make a bit of extra income. But many people will buy and see the stock go up a bit, and then hold it into ex-dividend---which is the day the dividend is paid out--so the price excludes the value of the shares that is lost to the dividend payment. So if they buy too close to the dividend and hold it after, then they will break even as long as the ex-dividend price does not go any lower than the ex-dividend rate. They break even because they will receive the dividend. So they do have to bank on the price going up in anticipation of the dividend, but like I said, if you have companies that do so, then it's an easy few points.

In Japan the stock certificates were bearer certificates (I don't know if this is till the case), so people would have to register the shares to get the dividends, and registration took a week or two. So the strategy would not work the same there. Sometimes I would register the shares, other times I would not. Sometimes I would sell a stock, and a year or two later I was still receiving dividends from it.

 

I had some more rules in mind but I can't think of them at the moment.

Don't buck the trend is a good rule. If the stock is going down, you shouldn't guy it until you are sure the trend has turned. Buying at a market bottom is a bit of a different situation, but if there is a company that you think is going to go up, but it keeps dropping, you should probably wait for it to turn unless you have a special reason for doing so, and you better know what you are doing.

There is a great example of this, but I have to explain what short selling is. Let's say you think a stock will go down, and you want to make money from that. You can do a short sale, in which you borrow shares from your broker, sell them, and then buy them back later when the stock went down. You make money as the stock goes down because you will buy it back for less. Unfortunately if the stock goes up, you will have to buy it back at a higher price to return the shares. And because the shares are loaned out, the brokerage firm might force you to buy them back or put up more money as leverage so you don't have to buy them back. If a stock rises sharply, then not only do you have the buyers buying, but the shorts have to buy back which creates a buying frenzy---this is called a short squeeze.

I'll tell you the story of the best short squeeze I ever saw. When Taser came out on the market, with their tasers, many investors thought they were over-hyped, the tazers were dangerous, and had problems and the financials were bad, etc. etc. So everyone and their brother started shorting Taser. And as the stock would go higher they would short more. Unfortunately for them there was also a sizeable number of investors that thought taser was the greatest thing and was going to change law enforcement forever, etc. etc. So they thought it was going to go up and bought. The short interest grew like crazy which caught my interest (Short interest is the percentage of total shares in the market of that company that are shorted, and the higher the number the more likely there will be a short squeeze.) The crazy thing is, the higher it got, the more people shorted it. When you borrow the shares from the broker, they are just technically pulling them out of accounts, because if that investor sells those shares then the brokerage can just cover it from someone elses shares, and if need be there is a clearing house, etc. If I remember right--the amazing thing is that Tasers short interest got so high that if all the shorts covered their positions, they would have to buy back more shares than were even issued in the market. Anyway, it was an amazing stock to hold, it would have been a nightmare to short. I talked to many active traders in both camps and I made sense of what was happening to all of them. But most of the shorts were convinced they were right and continued to short and put up money to cover their shorts. Don't buck the trend!

When you deal with the stock market, you learn a lot about psychology---because there is nothing more impacted by psychology than people doing things with their money. One piece of advice I would give is don't take stock or other investment tips from friends. Let's say your friend is all excited about some stock and wants you to buy it too. If he is a professional trader, there might be a reason to listen to him---professionals often share tips with each other. But if he is just some bloke, he probably is in love with the stock---breaking my number 1 rule. But here's the thing----people need validation-----so he may have doubts about his decision. The doubts may even be subconscious and he doesn't even know it. But the more people around him buy the stock, the more validation he feels. Even worse, he may be losing money, and you know, misery loves company. He may need more validation for his choice, or the psychological satisfaction of, 'see? Im not the only one to buy this.'

If you have a friend that is an analyst or trader or whatever---he might have some good tips. I always did. Earlier I wrote about the buy-side and sell-side analysts. One of the buy-side analysts I met with the most was a Japanese guy from Fidelity. I would take him to company meetings when I met the CEO and CFO, and we'd discuss together what we learned. We'd often go out to a bar afterwards, and I'd tell him of stocks that I found that I could not recommend because they had great charts and stories but not fundamentals that I could push professionally. On my own, I loved trading against speculators and market manipulators, and for this reason, I had a few yakuza connections because most of the big manipulators were either yakuza or politicians. So quite a few tips I gave him were in play because the yakuza were buying them up. He said that of every analyst he met, I gave him the best tips for himself.

We were a bit of a tight nit community---us foreign analysts and traders. There were some popular hangouts in the 80's in Tokyo where we would meet up. One was this little bar made from a train car or a trolley, and you could see all the business cards of all the foreign investment people that went in there tacked to the walls. We heard all the rumors, shared tips, talked scandals, etc. I remember hearing about the trades of the trader who bankrupted that British Investment bank----I forget, Barings, was it? Everyone was excited in London because they were going to get their bonuses after the weekend----Unfortunately the sun rose up in Tokyo first, and his huge trades against the market destroyed the company even before the British employees woke up. I heard people talking about his trades---his bets----probably a month or two or even more earlier. I shook my head and said, 'He's a fool. Those bets will never pay out.' There's a movie about him. I forget the name. He was an international fugitive for a short time.

Here's an important rule----there is always a last chance to ever see this happen again----it is not. If a broker tells you that this is a once in a lifetime chance, or that this will never happen again, those things always happen. The market that ended in 1987 was the greatest bull market ever, until the 1990's came along culminating in the dot com market that peaked in 2000, that was the greatest one. Until the market that lasted till 2008, and so on, and so on. Even worse is that a lot of great things that will never happen again, are not great things at all. I forget what company it was, but a lot of brokers started pushing this great play, I think it was in Ford. I forget the details---it might have been an option play or something. But the problem was that the investors actually stood to lose money because the brokers didn't quite understand how the investment vehicles worked in this situation.

A similar rule which goes back to the Lehman Brothers who founded Lehman Brothers----'If you don't understand it, then its a No.' I'm paraphrasing because I forget the actual phrase they used. In the Ford play I mentioned, the customers certainly couldn't understand it, because-------The brokers didn't even understand it. Option plays can get real complex, for example, but you can break them down into their parts and figure out each part and then gain an understanding. If you don't, then you shouldn't do it. There are option plays, with combinations of calls and puts and buys and sells that on the surface look like they might make money----but in reality can really bite you.

The Lehman Brothers would also quote these french sayings that are so true of the market----The more things change, the more they stay the same. And, just because it happened that way the last hundred times, doesn't mean it will the next time. Together these may seem contradictory. But they describe the market to a tee. There will always be a point where people say, this is the greatest market/economy/technology ever and it will never end. But it always will. It may be a different way than last time, but it will happen.

Another rule---anything can happen. I don't know how many times I have heard brokers tell clients, 'that won't ever happen,' and I have to pull them aside and say, never say that. Usually it was good intentioned-----a customer was trying to do an overly risky trade that seemed unlikely. But the fact is, anything can happen and often does. I would tell them, explain to the customer why it is unlikely to happen, but the market is not always logical and anything does happen. After I retired there were several times when I had to place a trade through someone and they told me it won't happen. I would tell them to place the trade with a 'Do you know who I am?' And then I'd lecture them on why they should never say that, and yes I know the risk etc etc. Later I would hope that they would look to see that I was right about what would happen, and knew that chances were very good that they would (in hopes that they were right).

Another thing to keep in mind, which if you have read everything here, you should know already: No one knows what the future will bring. And professionals do not have some special knowledge about the future. They may be well educated about the past, and know the trend up to today. But they do not know the future. Except for those in the markets who sacrifice goats under the full moon and read their entrails. They are the only market professionals that know the future------but I think the Christians have burned all of them at the stake, after I retired. After all, none of us have crystal balls----except for me. I have several. (As I said, the Christians burned them after I retired...)

 

I got into the market for about a year and a half. I got in at the tail end of the tech boom. Since it was the end of the boom, most tech stocks were leveling out, some starting to go under. So I quickly realized going long was not going to be profitable.

So I started to short tech stocks, as I saw the bubble was about to burst. However on that score I was a bit early and it was another year before the big tech shakeout, by which point I hadn't got anywhere.

Then, I noticed the day Viagra was approved, and realized it might make other ED remedies obsolete. So I shorted this company that made a very uncomfortable penis insert, figuring it would lose a lot of customers now that Viagra would be available in the US.

I cleaned up while that company's stock tanked. I was up 30K, but then the stock stalled. After a few more days it started to move up, for no reason. Next morning I get a message from my broker that I've got a margin call. I see the stock jumped again, for no reason.

Someone was trying to squeeze me and it worked. I got out before I lost my shirt. I figured the broker purposely did the margin squeeze in the middle of the night to make a tidy profit.

After that I reviewed the experience I had with various stocks and realized the odds were better in Vegas. In both cases the house always wins. With stocks it's the brokerage. I haven't invested in stocks since.

Daytrading is not worth it. Capitalism isn't for everyone.

 

I understand that sentiment. A lot of people feel that way.

I prefer the stock market to gambling because I think the odds are better---you can control the risk or at the very least monitor it.

Monitoring a stock breaks down when a stock gaps up or down----in this case, if the stock gapped up quite a bit (meaning it opened up much higher than it closed the day before) its possible you wouldn't have had a warning or any time to get out. But usually stocks move and give you a warning. You could have protected yourself, for example, by buying calls. A call option is an option to buy the stock at a set price. Let's say you shorted at 10, and the stock was at 6. Since the stock was moving down, lets say calls to buy the stock at 6.50 were relatively cheap so you bought them as portfolio insurance, and then suddenly the stock gaps up or moves up to 9, you can exercise your options and buy it at 6.50 with only a 50 loss in your profits plus the cost of the options. If the stock doesn't go up, the options expire and you do it again.

But you see my rules at work here----anything can happen. And this is what I am always telling people. And people get attached to the reason for their investment just as they do the stock itself---it really is the same thing---because for them, the reason for their investment is the persona they see of that stock. The people that were shorting taser really believed that stock was going to drop. And they had good reason to believe that. And this is the risk no one talks about with fundamental analysis. You can do your research and find an incredible gem that is way overvalued, the company is losing money, etc etc, and so you short it, yet it goes higher. Or it moves up and you lose your profits. It may seem impossible that the company would do that. But there are always people that believe in the other direction. Maybe there are rumors that they're in talks of a take over or a white knight coming. The rumors could be false, but they could still move the stock. And if the short interest is very high, everyone that shorted it like you, suddenly needs to buy back their positions pushing it up. There are all kinds of reasons for a piece of crap stock to go up. There are also all kinds for an incredibly sound and great company to go down.

In the 1980's in Japan, insider trading laws were never enforced until a case in late 1986 as I recall, and it was just for show to tell the world that they were worthy of being an international market place. The people that did it got a slap on the wrist is all. So a lot of inside information made its rounds. And sometimes it was a dud. A certain person who is posting in this thread bought some shares of a Japanese stock one time on inside information in Japan. When the news came out later, the market wasn't even interested and the shares did nothing.

Another rule about the market is you have to understand risk-reward, or risk-return. This means that higher risk trades can create higher returns, but you also increase the risk for losses and greater losses at that. Day trading is higher risk than swing trading or long term trading. Like I said, all those people that were taking huge losses in March of 2009, if they held on, they would be making big money today. Trading in one stock or a few stocks or one industry is riskier than diversifying. Shorting in a bull market is more risky just as buying in a bear market is more risky. Using margin to borrow to buy larger positions, or shares to short, is always riskier than trading on what you have.

If you want to take on more risk, you definitely need to understand what you are doing or how to manage it. My advice here, again, is to learn how to read charts. I don't know how anyone can day trade without a good handle on charting. And being higher risk---they would have to understand that the charts that involve minutes and hours and days are less reliable than those that show months and years of data. Too much can happen in a day with a big impact, that over a year or years means nothing.

My risk preference was always fairly high risk. I never did day trading unless it was a special situation. I was a swing trader holding positions for days to months at a time. There were also times when I put all my eggs into one basket----traded one stock----such as the mortgage insurance company I told about. But I knew the risks, and I felt that I was not taking on too much risk because I managed that risk with charts.

Its important to understand the difference between trading and investing. Every trade you make has the potential to lose money. What is important is that you make more money than you lose. And you can have a bunch of winning trades before you take a losing one. But if you are trading you need to understand this. Investing should be done to grow your money over time. So you might lose some money in the short term, but long term you will gain.

The problem is, most people are like sheep. The last thing they'd ever do is buy into a market at the bottom. Most people will not do anything until they hear about other people, especially their friends doing it, or bragging about it. Then they will think about it, and start noticing more and more talk about it. Their friends keep bragging about the money they made, and then they jump in----late and near the top. This is largely why volume is always higher near the top. The market doesn't turn and fall until the last investor or would-be trader jumps in. Not because its a conspiracy. But simply because, at that point, there is no one new to sell to. Many of those people will jump out at the panic at the very bottom. I've seen this countless times.

In the end, for me, the market has always been very very good to me (like the old SNL sketch). It's life events that have been costly---like an ex-wife, etc,

 

As Toker said, capitalism isn't for everyone. The problem is, if we don't fix the problems that it is having, it is going to end, and with the large global population we currently have, and the reliance that we all have on technology and the problems that we are facing with global warming and the polluting of our ecosystem, this will not end well. It doesn't matter if it is by a massive financial collapse, which if you want to know more, I can probably scare you with that scenario (hint----we should no longer be questioning if large companies are 'too big to fail,' and this is an issue that one country should no longer decide on its own); or if it is a result of a slow decay into a suicidal self destruction brought on by the greed of the over-wealthy (the rise of populism and fascism could very well be the political side of this); or if it is because we humans are too stupid to deal properly with environmental problems and limited resources and we destroy our home; or even the specter of nuclear war has raised its head again. I fear that we may be facing a global fin-de-siecle and because of what modernization has done for us, most humans will not survive its' end.

Unlike some people though, I am optimistic. I do feel that we are going through a period of transition, and that we may come out the other side solving many of these problems, as we always have, and will be on the verge of facing new ones, as we always have. But the current path we are on displays a sad move to a 2-class society. That is one of the problems we have to fix. If you aren't creating wealth, then you, or your children, could very well end up on the wrong side of this move. For that reason, I believe the stock market is a very important way for anyone to build wealth for themselves and their families and to end up on the right side of this transition. But you have to have knowledge and know what you are doing.

Anyone can become a millionaire. There is a magic formula to it. I wrote an article for young people on this and sold it to a magazine in Asia many years ago.

The first way to do this, is to get a job as a trader, or an analyst, or M&A specialist or something like that at a big Investment Bank on Wall Street. Then you have to work hard, use some tricks, always impress people, and then you will make it. On Main Street, you know you've 'made it' when you get the window or corner office. On Wall Street you've made it when you get your first $1,000,000 bonus! It's simple! That's all there is to it----now go out and do it!

Ok, I'm sensing some of you are not fully on board with this. Some idiotic idea that there can only be so many Wall Street people or something silly like that.

All right, maybe that isn't the secret formula I wrote about----I mean, it could work, but...

Seriously, anyone can become a millionaire if they have enough time, can create an account and generate a steady return, and deposit money into this account without spending any of it while you build it up. Obviously the older you are the less time you have to actually do this without raising your return or deposits to a ridiculous amounts.

So what is the magical formula? Its in a magical table of divination: Systematic Investment Growth Tables. You can find them in Investment Return Handbooks, or whatever title of book that has investment return, and future value tables, etc. Many college finance books might have this in the tables at the back of the book as well. The table will show columns for the period of time on one side and the rate of return on the other side. It will be set up for a specific base dollar amount such as $1 or $10 so you will have to multiply the result it by the amount you want to deposit each time, and it is typically meant to show monthly deposits. It calculates how this monthly deposit will grow at a compound rate. So, if you were to deposit $20 each month into an account at 6% interest, which is what banks used to pay out back in the 70's. After 20 years you'd have $9,287.02. On the other hand, if you deposit $100 at a rate of 21.5% you'd have $1,164,000 in 25 years.

The problem is, the long term return of the overall stock market, and I'm talking an average of decades long term, is only 11 - 12% per year. This is the average of good years and bad years. So just sticking money into an S&P 500 index fund each month will require either a longer time or a greater deposit to reach $1,000,000 in say 20 years.

But first think of this---you could greatly increase the return if you followed my advice in earlier posts and got out at or near the top of the bull markets, and bought at or near the bottom of the bear markets. That would create a pretty high return---which I have never bothered to calculate, but...

Now here is something else--these tables are based on annual returns. So what if you were to make, say just a 4% return by trading each month. Over a year you would have made a 12 x 4, or, 48% return for the year. An example of a 4% return would be a 12 cent move on a $3 stock. So basically, every month, after you deposit, you use all the money in the account to buy a roughly $3 stock and sell it after it goes up 12 cents or whatever the appropriate 4% move is, and then stop trading that month. Let the money sit in money market, which is an extra icing on the cake return until the next trade the next month. Now there will be months where you buy at $3, and the stock jumps 50 or 60 cents maybe, and you increased your return by making well over 4%. You might let it run a bit, as long as you get out right away and keep that return. Because inevitably, there will be months where you might lose some money. You want to get out fast if you do. But overall as long as you are averaging a mere 4%/month, you will earn 48%/year, and that would create a steady deposit of money into $1,000,000 relatively quickly. In bear markets you could invest in short etf's that would make money as the market drops and keep the 4%/month going.

How quickly at what monthly deposit? I don't know, I'd have to look for my Investment Return handbook to see. There are formulas you can use to calculate it yourself, but I'd have to look those up too.

This is perfect for an IRA where you are trading tax free. Otherwise you would also have to adjust for your capital gains taxes and other costs. There are discount brokerage firms where internet trades are commission-free.

 

Charting is not going to be magical. For one thing, you are still the one to pull the trigger. You will hesitate, or choose to ignore the signs, you will focus on positive things in the charts and will ignore the negative signs. And again, no one knows what tomorrow will bring, and anything can happen. But they will give you objective information that tells you exactly what has happened up to this moment, what trend the stock or other security is in, and provides a way for you to decide whether you should get in or out, to hold or to wait.

Back after Enron happened, a lot of people said, 'how could anyone know when the trend turned and it crashed?' It's actually pretty interesting because there was a lot of talk that no one could have foreseen it. There was talk among professionals that the only way you would have known to get out is by following the fundamentals. On the other hand, there were professionals who claimed that the only way you would have known to get out is by the technicals. In truth there were both fundamental and technical signals to get out.

I was working on the retail side at the time---servicing active traders. I didn't pay a lot of attention to Enron because, personally, there were other trades I liked. But one time this old lady called up. She was in her 80's. I know because she sounded just like a little old lady, so I looked at her birthday and did the math. She asked if I would help her check on something with Enron. She said that she had been looking at its financials and something didn't seem to add up. In fact, she identified the issue as probably something with their debt. So I went to the Bloomberg machine pulled up its financials and a history of it, and we went through them together. She was right, there was something wrong and it seemed like it probably had to do with the company's debt. And it was very clear that the company's profit margins were clearly shrinking quickly, and I went back to the Bloomberg and got some industry stats, and pointed out to her that its competitors were not having that issue with their profit margins. This was probably a month or two before the company collapsed and here this old lady was doing a better job of assessing the company than a lot of analysts were. But it was right there and anyone who took the time could have seen it. We both agreed that it was probably a good idea to get out, or stay out. But it did climb quite a bit over the next month or two.

The charts for Enron showed a very clear and strong uptrend, with some significant trend lines. A technical analyst would have known that if it broke those lines, that trend is over. And indeed, a day or two before it really crashed, right near the top, it broke those lines. So both sides were right. If you looked at the fundamentals you could have seen a reason to get out. The problem is, it never told you when to get out. On the other hand, not only did the charts tell you to get out, they told you exactly when to get out.

A lot of people that use charts trade companies that they don't know anything about or even what they do. They don't need to. The chart gives them all the information they need.

If anyone was interested in learning charting, I could probably make some time if you DM me.

 

No offence tl/dr

Still think hipforums is not the place to get advice.......and yes you can make money if your carefull and know how things really work.

I love hipforums and the people, but going too random small forums asking random people for financial advice............



Mzzls

 

I agree, that is like asking your neighbor who brags about making so much money in the stock market but drives a taxi or works in a factory or something like that. And you know, finding a Wall Street guy in a group of hippies is not so likely (even though many of us that are, just followed the advice of Jerry Rubin to go back into the establishment).

My stab at your post was all done in humor. I have always been the exception to the rule. I think that is the essence of a hippie. If you can't be that, how can you be truly hip. All through my career in the stock market, I was certainly an exception. Being a contrarian investor, you are always an exception. Including from those who try to be contrarian but simply lose money because they think the idea is to simply go against the trend.

 

I created a thread in the business section of HF called, A Little Investment Secret. Here is what I posted:

Here's a little way to invest and build money quickly in the US stockmarket by setting up a systematic Investment program for trading. Since trading involves risk, you need to pick a small return that is easily attainable, but a small return does not produce large gains, unless it can be made over a relatively small period of time. For example, if you make a return of 3% a year, that is a very small amount of money. However a 3% return per month can produce a large return over a year--24%, while a 3% return each week is a whopping annual return of 156%!

On a $1 stock, it only needs to move .03 (3 cents) to make a 3% return. A $2 stock .06, and a $3 needs to move only .09. to make a 3% return.

Set up an offshore trust in an offshore location such as the British Virgin Islands.

Then set up an offshore company owned by the offshore trust.

Transfer money to the offshore company by 'buying its services or its product'---but what you are really doing is investing a set amount each week into the offshore business.

The offshore business gives you power of attorney to trade its account which you place in an online brokerage firm where you can trade with zero commission. With the POA you are the point of contact for the company in the US, and as long as the offshore company does not have a location in the US, then it can trade without capital gains tax.

So, let's say you are investing on a weekly basis with a 3% target. Each week you would invest into the portfolio a set amount, for example, $100, which would go into the brokerage account you manage through the POA. Then you place the entire account into one position, with a limit order to sell after a 3% move. Let's say you buy a stock at 1.55. It would need to move a little over 4 1/2 cents to make 3%. So let's say you decide to sell at a 5 cent move so you put a good-till-canceled order to sell at 1.60. On a typical day in a bull market, in a stock that is trending up and is not too overbought, that should be a very easy trade to complete. In fact there is a good chance it would trade that day or the next.

Once it sells, you don't do anything for the rest of the week until you put the next $100 into the account the following week.

This is not a sure thing, trading involves risk and every time you open a position you are taking on risk. By the end of the year you will have made somewhere around 52 trades. You will have likely taken a loss on some of those trades, and you may have even taken on a position that gapped down while you were holding it, which could certainly take out a chunk of your portfolio. In a bear market or a correction you may decide not to trade, but one possible trade would be in a short ETF---an exchange traded fund that shorts the market so that it goes up as the market goes down. Another possibility would be put options.

Certainly to do this sucessfully I would suggest being very familiar with charts, and know how to use stock screeners. If your portfolio become large, you would probably want to focus on companies with larger institutional holdings, or at the very least, trade at high volume, so that you can quickly buy and sell in a single trade without moving the market.

Using the offshore company allows you to avoid capital gain taxes, but you could certainly do well in your own account, without an offshore entity, and just pay the taxes, especially if you have losing trades to offset the gains.