I’ve been known to only read the headlines of articles only to find out later that it wasn’t exactly true. Don’t make investing decisions on just the headlines alone. Understand the news before you make any buy or sell decisions. The good news in this, people do make quick decisions on just headlines. By understanding the news, good or bad, could help you profit while other people are panicking.
Happy Trading!
Trailing loss limit is a great option for people who can’t watch their stocks. The problem I have run into is which to choose, percent or a base dollar amount. I love percents when it come to profit, but is it really the best option for a loss?
Example:
You buy a stock at $10 with a trailing loss limit of 10%. The loss limit would be $1.
Let’s say the stock makes a move:
$12 – loss limit of $1.2 or $10.80 : Profit of $.80.
$15 – loss limit of $1.5 or $13.50 : Profit of $3.50.
Now let’s look at the dollar limit:
$10 with a trailing loss of $1.
$12 – loss limit of $1 or $11.00 : Profit of $1.
$15 – loss limit of $1 or $14.0 : Profit of $4.
The numbers are convincing. I can speak from experience that the percent can bite into your profits quicker than the dollar amount. The biggest drawback of the percent is that it gets bigger as your profits grow.
Good automation should never limit or sacrifice your capital and profits.
Happy trading!
A trailing stop loss allows an investor to set a loss limit (dollar or percent) on their stock. As the stock trends upwards the limit follows. Example: If you set a $1 trailing stop loss on a $5 stock and the stock drops to $4, it auto sells. If the stock moves to $6, the limit is $5. This a nifty option that protects your capital without constant monitoring.
This is handy for you lunch break investors. Say you go to lunch and have a nice burrito. You find the dream stock that is going to make you millions. You buy! Just in case, you set a stop loss at 8%. Now this awesome stock grows and grows. Then one day, bang! It’s not a hot stock any more. Your trailing stop loss kicks in and sells at 8% under the last “up” closing price. Now you made millions without trying. Or in some cases stopped your loses before you lost a bug chunk of change.
Use trailing stop loss to protect your capital and profits.
After careful consideration, I have decided to try a new investing strategy. I’ve found that I do not have time to use the traditional rules. My rules will have to fit my time constraints. In other words, it has be easy and simple enough to do during my lunch hour.
Here are my Lunch Break Investing Rules:
1. Only buys stocks on the watch list.
2. Must be trending upward.
3. Must have a trending sweep of at least 10%.
4. Buy only at the bottom trend line.
5. Set a loss limit (2-3%).
5. Set a trailing stop loss to 8% below the bought price (dollar amount on the stop loss, not percent)
6. Set a profit limit (5-10%).
6. Allow the stock to trend upward until trailing stop loss is activated.
7. Never break any of these rules.
8. Adapt my strategy as needed.
Over the next several weeks I will be expanding on each of these items. I will also concentrate on the automation and mobile techniques.
Comment and share!
Here is my full confession to my horrible mistake. I did it again! After careful consideration and research, I bought 200 shares of a nice pharmaceutical company. I followed my rules:
Added it to my trading journal
Calculated my Profit Limit
Calculated my Loss Limit
Set my alerts for both profit and loss
The stock did just as I expected. It hit my profit limit. As always, when my iPhone dings it’s ding of profit, I cheer and do the “the profit dance”. But! I didn’t sell. The whispers of greed said, wait it could go higher. I missed the word “could”. Yes, dear reader, the spirits of trading punished me for not following my own rules. The stock dropped. My iPhone mournfully sang the tune of loss and I frowned and did the “loss shuffle” to my computer. It touched the loss limit, but didn’t go below. I was safe. I now promise the trading spirits that I WILL follow my rules and sell when my limits are met. Again, I have learned my lesson the wrong way.
Thanks for reading, check back later for a more light hearted and happy post. I promise!
I know everyone has lost money in the stock market due to the recession, but this is the best time to get started. The news has calmed down and found other things to blast us about. Companies appear to have stabilized, unemployment is starting to ease (or at least not making a sky dive into the metaphorical ground). The best part of this is that once things turn around, they go up. Up is good! Getting in the market now means you are getting in the ground floor. Remember the oft and over used saying, “Buy low, sell high”. Its low, time to buy.
Get in and get started. Learn the ropes and make some money. And of course, check back here or subscribe to the RSS for more articles and tips!
The first time I bought any shares of a company I was terrified. I had no idea what I was doing and if I was doing it right. Believe it or not, it’s not painful and it’s very easy to do.
I use Scottrade, so my steps are more geared toward their service, but its similar for most places.
Step 1:
Log into your brokerage’s web site and click buy. Scottrade’s option is on the left side. Be sure you have enough money deposited into your account. If you do not, deposit the money and proceed to step 2.
Step 2:
Enter the stock ticker symbol. (Example: GE is General Electric and PG is Proctor and Gamble)
Step 3:
Enter the number of shares you are buying. To find this number you take the amount you are investing divided by the current share amount.
$1,000 (amount invested) / $10.00 (the current share price) = 100 shares.
Be sure to leave a little extra available for the commission and price changes.
Step 4:
Market vs. Limit
The “Market” options buys the stock at the current price or close to it when you click buy.
The “Limit” option allows you to enter how much you are willing to pay for the stock.
I used to use a limit on all my buys until I figured out that I was wasting more time chasing a stock within pennies of where I wanted to buy. I now only use the “market” option. Those few penny changes doesn’t worry me as much. If I was trading millions (I wish), it would be different.
Step 5:
Click Review/Buy (wording may vary by service).
Step 6:
Celebrate! You bought stocks and are on your way to accomplishing your financial goals!
Happy Trading!
Don’t risk your money on untested strategies. You will get bitten by the Wall Street sharks. I always test my new strategies on paper for a month. Its fantasy stock trading!
Here are the rules:
1. Pick your dollar amount. Be realistic. If you aren’t trading in the millions, don’t do it on paper. $500 is a good starting point.
2. Write down your rules and stick with them.
3. Your buy amount is the closing amount of the day you buy. Write down the date and amount.
4. When you sell, it’s the closing amount on the day you sell. Write this down as well.
5. After a month check your profit/loss. How did you do?
By doing this, you can decide if the strategy has merit or is a dud! Its better to find this out before you risk money. This is good for short term trading. If you are in the process of saving money (Part 1 – How much money do you need? Investing for only $50 a month) then use this to get more familiar with the market (long term or short term). You can modify the rules a bit to try day trading, but it’s more extreme.
Got a new rule to add, a question to ask or simply want to comment please do so below. I love comments, it brings joy to blogging!
If you are new to this site you may want to start with part 1 of this series. If you are a returning reader, Welcome Back!
By now you should have created a plan to save money for investing and have several goals in mind. Today it’s time to consider what style of trading you will need to reach your goals.
Long Term Goals (10+ years)
For big long term goals like purchasing a home, you will need a long term investing strategy. Invest in value stocks or any investment that pays a dividend.
Strategies include:
⁃ Dividend paying stocks – usually Big Cap stocks
⁃ Value Investing
⁃ ETF’s
⁃ Mutual Funds
⁃ Index Funds
It’s best to reinvest any dividends paid. Remember, you want less risk with these goals.
Intermediate Goals (5-10 years)
These are goals such as luxury vacations (Paris, Kentucky* in spring?), luxury car**, or any big ticket “want”. The item tends to have the word luxury associated with it.
Strategies include:
⁃ Value stocks
⁃ Small-Cap
⁃ Growth Stocks
Look for companies that are growing their business or good companies whose stocks are undervalued. Your goal is to create a portfolio of stocks you can cash in for a nice profit in the next 5-10 years. You’ll take on more risk for greater reward.
Short Term Goals (1 day – 5 years)
Short term trading is the riskiest, but with the high risk comes a larger reward. Your goal in short term trading is to buy and sell in a short period. You may keep a stock a day or over a year depending on your strategy.
Strategies include:
⁃ Day Trading
⁃ Swing Trading
⁃ Value Stocks
⁃ Penny Stocks
⁃ and many more…
BIG WARNING: SOME OF THESE STRATEGIES WILL LOSE MONEY. Short term trading is VERY risky!
Subscribe to the RSS or return to this site for more information on stock strategies.
* Yes, there is a Paris, Kentucky. Fun fact, the first winery in the United States was in Kentucky. Oddly, it’s not related to Paris, Ky.
** or pickup if that is your thing
If you already have the money, great job! If not, keep saving and don’t get discouraged.
Your next step is to decide on your investing goals. Having an investment goal is important. What good is investing if there isn’t a reward for doing good. After choosing a specific goal, I found that I was more interested and made better decisions based on my goals. Your goals will also determine your investment style. Short term goals for short term investing and long term goals for long term investing. Don’t worry, it’s OK to have several goals. Just don’t pick too many, unless you have the cash to cover all of them.
Here are a few examples:
Pay off car (that’s one of my goals)
Retirement
Buy luxury vehicle
Buy a home
College
Luxury items (big TV, gadgets or other nice wants)
Big vacation – Is there somewhere you would really like to visit? Like the Fried Chicken Festival in Corbin, KY (not making this up and I want to go!).
Quit job – It would be nice to be independently wealthy. This one is hard, but possible.
Warning:
I tried investing for money and it didn’t work out well for me. Just being rich is a nice goal, but harder to obtain without the details to get you there.
Action Time:
Name one or two goals with a reasonable deadline. Write them down or create a goal board with pictures of what you want to achieve. This will keep you on track and interested.
Now that you have your goals, you can decide on your strategy and style of investing.
Here is how I put this into practice:
I’m hoping to pay off my new van early. I’m shooting at short term investing. I add a little extra money every month to my initial investing and shoot for small quick profits every week (swing trading – more on that later). This also keeps me focused on what financial books and resources to use.
Related Posts:
Investing for Beginners – Part 1 – How much money do you need? Investing for only $50 a Month!
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