Day Trading

Business Money
1

DISCLAIMER: Neither the OP nor anyone else posting here can possibly know what the market or any particular stock will do. None of us claims to be an expert and if you rely on anything in this thread you do so at your own risk. If you earn a profit, great. If you don’t, too bad, it was a gamble and you lost. Don’t blame anyone but yourself.

When I first started putting aside money for my retirement, about 1990, I did a little research and came to believe that the surest way to riches was to follow the path of legendary billionaire, Warren Buffett, who as I understood it picked a few solid stocks and held them for decades. Lots of articles discuss how one can’t time the market and those who buy and hold do better in the long run than those who buy and sell, buy and sell, buy and sell.

I’m no Buffett and that strategy sure didn’t work for me. I won’t confess how much I lost by holding onto duds like GE and Cisco (and by purchasing them at their heights, due to the hype). Here in Taiwan, though, I’ve seen my wife practice day-trading with terrific success. Sure, she has her slumps (she’s in a bad spot right now and embarassed to discuss investing with me presently), but over the past few years she’s far surpassed my crappy buy and watch it sink strategy. So, I’ve dipped my toes into the practice.

Check out this crazy stock I bought and sold last week.

finance.google.com/finance?q=JADE

It’s a company that designs, manufactures and retails gems and jewelry, including through its ENZO stores in Asia (I think I’ve seen them in Taiwan). It’s a micro-cap, with only $142M in capital, which makes it extraordinarily volatile. And, as you can see above, in January alone it has climbed from about 4.5 to 7.5, for a gain of 66% in less than a month. Apparently that gain is solely because they’ve been doing lots of conferences since Dec, promoting themselves to investors and they were written up by some stock expert.

To be honest, I knew very little about the company and was scared as hell about putting my money into it, but I figured it was shooting straight up, I’d just go along for the ride for a couple days and bail out, which is what I did. I sold 2 days ago. Too bad. It went up 9.9% last night. Oh, well, I made a little on it, so I can’t complain. It may continue upwards yet, but too risky for me.

How about you? Been doing any day trading lately?

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I haven’t done it in a while, and the reason I got out of doing it was not that I lost money, but that it was nerve wracking.

I have two leftover bags, one a biotech and the other an internet blahblah something. The latter has been doing very well of late and I sold half to recoop my initial investment and now I’m waiting to either put it into some new damn thing or just slide it into GTY or ALD for a hefty dividend payout. The biotech WILL cure cancer one of these days! It did a reverse split and is now trading at presplit 22cents. I’m down 70% or so, but it CANT go any lower! lol

How are you picking your one night stands MT? I might be up for an investor’s group that day trades.

3

True. It is.

I understand that. I’ve lost on big duds and small ones.

I’m far from an expert, but I start by reading lots of expert stock picking recommendations (from Motley Fools, Forbes, NYT, advertisements, websites, or whatever), checking out each recommended stock, evaluating them with my own crude methods, discarding almost all of them and deliberating over which of the small handful that remains, if any, appears most attractive. I liked that Citibank report because it contained about 75 recommendations. From that many there should be a few interesting ones.

As for crazy gambles, check out this one that one “expert” (J. Christoph Amberger of Dynamic Market Alert) picked as his favorite for 2007: Cyberkinetics (CYKN), an OTC stock presently trading at $1.21/share.
finance.google.com/finance?q=OTC%3ACYKN
It’s a tiny company (market cap $45M) that’s trying to develop electrical devices to stimulate brain activity so that cripples can move their limbs. Cool stuff, and if they invent real-life working devices that get FDA approval, perhaps their stock, being so dirt cheap, could multiply ten-fold overnight. Or maybe not. I decided to put my money elsewhere, where I’m more confident of immediate results (CBH, which I discussed in the Citibank thread).

But, the jewelry company I mention above was the top pick of another “expert” (Ian Wyatt of Growth Report & Rising Star Stocks), and both were mentioned in the same Top 10 Stocks of 2007 report that I found somewhere. As I said, I definitely do not believe in a stock just because some guy picked it. Most picks are wrong. But I find sifting through their picks to be a good starting point.

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Well I’m an options trader and have been doing quite well at it. Over the last couple months I’ve been able to match my “real job” income. I suspect that as my portfolio grows and I’m able to put more and more money into plays, I’ll eventually be exceeding my real job income. By the most strict interpretation of the word, I wouldn’t call what I do “day trading” (buying and selling in the same day). I buy and sell generally within 1 to 3 weeks. Buy in the dips, sell at the peaks, so to speak. Of course its far more complicated then just that. All of my plays are based on company research, financials, technical indicators, chart patterns, breakout signals, etc.

As I said I trade options, generally just calls at this point since all the major indexes have been bullish, but occassionally some puts. I’ve stayed away from other options strategies, such as spreads and covered calls, for the simple fact that what I’m doing now works, so there’s no need to change strategies.

2007 has been good to me so far. I had 5 winners and no losers in January. I’m getting ready to get into 2 more plays within the next day, but I’m waiting to hear what comes out of the 2-day Fed meeting that ends today (Wendesday).

5

What do you think of this one, Vertigo?
finance.google.com/finance?q=KOF

It’s my favorite stock, as it dips up and down a lot, making for good short term gains if that’s what one wants, but if you look at its long-term performance, it’s been just great, rising steadily for over a decade, meaning you really can’t lose on it.

I bought and sold it a couple of times and was looking to buy again last July but decided it had already risen too much. I regret that decision, as it’s been on a tear since then.

Would you agree? Does KOF look attractive to you? What are some stocks you’ve traded recently or have considered?

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As far as chart patterns are concerned, that is the kind of stock that I look for. If you pull it up on a chart with the 30 day moving average, you’ll notice it “bounces” off of the moving average as it gradually rises over time. It has done this pretty consistently since last July, and prior to the big dip it took in June, it looked like it was doing the same before that.

It does appear that the company’s fundamentals are very slightly under par by the standards that I normally use, but they don’t appear to be terrible by any means. I don’t like that in the last 5 earnings reports, it has missed analysts estimates 3 times. The price/earnings ratio and cash flow growth seem good. All in all it appears to be a pretty decent stock.

My 5 winners in January were call option plays on: AKAM (two separate plays), QQQQ, ETFC, and CHAP. All of these I have traded before and profited on multiple times. It’s all in the timing. :slight_smile: As far as getting the timing right, I use a number of technical indicators, most notably MACD, stochastics, RSI, bollinger bands, and volume.

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You guys are crazy bastards…thats all i can say. Remember Warren Buffet changed his strategy to buying quality stocks and holding. The reason for this is that he couldn’t find enough stocks trading at a good discount or “margin of safety” later on when he was controlling billions on the market.

I follow the value investing principles laid down by his mentor Benjamin Graham.

8

I trade options because I can make a lot of money quickly (though I can also lose it quickly too). I can make 40, 50, 80 and sometimes more than 100% back from an investment in a matter of weeks. I do it quite regularly. While Warren Buffet’s strategy obviously worked for him, I’m not quite in the same position as him. I don’t have enough capital to be buying 50 dollar stocks. Sure, I can buy a few shares, but not enough to make me any money, even if the stock does move. Not only do you have to have enough money to buy a meaningful number of shares of a stock for it to be worthwhile, but you also have to be able to afford to leave that money tied up in that one stock for a period of months or years. Even if I did have that kind of money, I certainly don’t have the patience to wait that long to see a decent gain from my investment.

I’ll stick to options trading :slight_smile:

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Hey, how about all the people into trading meet up at Carnegies on a Sunday afternoon for a long chat. Some of us here trade different markets and we have different strategies… all bring along some materials I used to make some recent trades… it’ll be fun

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I’d love to join you guys and gals up there, but I’m afraid it would be quite a bike ride for me :frowning:

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I’m afraid I’m kind of a n00b to day trading (most of what I’ve got is in long term stuff) but I was able to turn around 10% on Apple stock in January, enough for a new Macbook Pro… appropriate enough, right? So I am interested in learning more. Those are pretty incredible gains MT - I wouldn’t worry about that last 9% for a second. That stock reeks of an impending sell-off - I’m surprised it’s lasted this long.

My thoughts about day trading revolve around trading on news - not earnings announcements as the following stock prices often defy all logic. But I think one could make good money with the absolute fastest access possible to the right kind of news. Usually it seems that unexpected good news for a stock has an immediate impact in the first few minutes and a less pronounced impact over the course of that day, more often than not in the same direction as the original momentum. Potential gains from the latter movement are probably not worth the risk of immediate profit taking. And often times one sees the insiders bumping up the stock price hours before news gets released to the public, which is inevitable. The question is how to get hooked up with the fastest news sources possible. Of course there’s nothing revolutionary here, just rambling. I’ve never talked with anyone about day trading before so I’m interested in this discussion.

But I would reiterate what TyC00n said - I think the wise choice is as Buffet says: long-term investment. The last three years have been very kind to the overall market so it’s easy to find a lot of people who have made a lot of cash day trading in that period. But the fall will hurt when the Bear market comes around. Long term investing doesn’t have to be boring - I like to keep it risky in that regard, so short term losses are possible. But in the long term big spikes are a good thing. A sufficiently diversified portfolio will always heal itself over time, and if it doesn’t then we’re all fucked so it won’t matter anyway. :slight_smile:

MT, it’s pretty clear that your problem in the 90’s was not holding stock too long, but a simple lack of diversification. Long term investing absolutely requires diversification, unless you get lucky and pump everything you have into a startup that grows for 40 years. Not a likely scenario.

As for “professional recommendations”, I consider them in a fashion opposite to most. I think they are a useful tool in guaging how far a stock has already been pumped full of expectation. In effect, the higher the ratings, the further away I’d stay. The same goes for all public sentiment towards a stock. The market works in such a way that tends to frustrate the majority, so going against the majority opinion on a stock is one way to stay ahead of the curve.

Let’s talk about Taiwan’s economy - should someone from the KMT get elected come 2008 that should set things on fire here, correct? I wonder to what extent this has already been factored into the Taiwanese stock market… I know on a personal basis most of the people I talk to tend to have a pessimistic view of where Taiwan is headed. Not smart if you ask me, there is a lot of untapped potential here pending renewed ties with the manufacturing powerhouse that is China. Regional proximity + a lot of savvy business people + the same language = huge potential.

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Where are you Vertigo? I can fetch.

I was all hard for options last year, bought myself a book, and had a brain meltdown when I opened it. It would be great if someone were there to talk me/us through it.

btw, Tycoon, everyone is crazy sometimes. I have about 1-2 percent of our TOTAL investment money that I allow to be used in riskier investments each year, so even if I lose it all, which hasn’t happened yet, I am still very well stabalised in dividend reinvestment plans in MO, PFE, GE GTY, ALD, VTSMX and others. :smiley:

Winning isn’t everything, but losing sucks.

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[quote=“Tyc00n”]Remember Warren Buffet changed his strategy to buying quality stocks and holding. The reason for this is that he couldn’t find enough stocks trading at a good discount or “margin of safety” later on when he was controlling billions on the market.

I follow the value investing principles laid down by his mentor Benjamin Graham.[/quote]

Changed? Wasn’t that always Buffet’s approach? One can’t argue with success. Buffet obviously knows infinitely more than any of us. But, like vertigo, I too lack the patience for long-term buy and hold, perhaps largely because I got burned so badly from 1999-2001 as I watched my stocks sink lower, lower, lower, and I figured it doesn’t matter as I’m in for the long run, and they kept going down. So now I’m holding a couple of mutual funds long-term, but I’m now trying to boost my overall return with some shorter-term plays.

Maybe. But I did try to diversify to a certain extent. I think the problem was more that I didn’t know when to sell. Two stocks I got hammered on were GE and Cisco. Everyone raved about them in the 90’s (for GE also in the 80’s). They were godsends; virtual money machines. But then about 2000, like so many stocks, they plummetted.

Here’s all data for GE

Here’s the same for CISCO

Not only did I believe then that I shouldn’t sell for 20 years or so, but they began crashing right when I moved to Taiwan (Jan 2000), so I was busy, disoriented and lacking regular internet access for the first year or so as they fell, I only checked up on them every few months, and I did nothing but curse them and forget about them for another few months.

I know I wasn’t alone. Lot’s of people’s portfolios took a serious beating in that time period and were forced to end their retirements and resume their working lives again as a result. But that period taught me one of the hard lessons I’ve learned about investing: sometimes it’s best to jump out of a sinking ship even if it means taking a slight loss, to avoid worse.

But I find it very difficult knowing WHEN is it finally time to abandon ship. Harder making that call when the stock is going down than when it’s going up, too, as one keeps praying that it will turn around and get better.

Sure, that’s sound reasoning and I’m sure most experienced investors agree. By the time a stock makes Money magazine’s front cover it’s way too pricey (except GOOG?). But, it still can’t hurt to rifle through the lists of “expert” picks to see if there might be some that haven’t yet been overhyped and driven to ridiculous prices.

I’d be happy to join y’all at Carnegies, wife permitting. My schedule is booked solid for the next couple months, preparing for CNY abroad, then recovering briefly before leaving on business in March. But, if you got something going I’d try to come down for a chat.

14

[quote=“Mother Theresa”][quote=“Tyc00n”]Remember Warren Buffet changed his strategy to buying quality stocks and holding. The reason for this is that he couldn’t find enough stocks trading at a good discount or “margin of safety” later on when he was controlling billions on the market.

I follow the value investing principles laid down by his mentor Benjamin Graham.[/quote]

Changed? Wasn’t that always Buffet’s approach? One can’t argue with success. Buffet obviously knows infinitely more than any of us. But, like vertigo, I too lack the patience for long-term buy and hold, perhaps largely because I got burned so badly from 1999-2001 as I watched my stocks sink lower, lower, lower, and I figured it doesn’t matter as I’m in for the long run, and they kept going down. So now I’m holding a couple of mutual funds long-term, but I’m now trying to boost my overall return with some shorter-term plays.[/quote]

Buffets approach was always to hold unless the stock became overvalued. The part that changed about his strategy was that in the early years he could obtain much higher returns because he was investing millions, not billions. Early on, he would buy companies that were either trading at a discount to their net tangible assets (companies that were often in good financial shape too). Obviously, depending on market conditions there aren’t so many companies like that, so as he invested more and more money, such bargains would hardly impact the kind of money he was moving, and as you move that much money you also push prices up. So his strategy had to change to buying very high quality large cap companies and holding. (e.g. Coca Cola and Gillette)

15

MT when did you purchase those two stocks? Cisco, for example, if you would have purchased it in 1995, would have gained 1200% to date. If you would have bought at the beginning of 1998, you would be up 200% after less than ten years - nothing to scoff at. Individual stocks, even if you have 100 of them, do not comprise a diversified portfolio.

On the other hand, yeah, if you bought in 1999 or 2000 you are still down (and consequently contributed to Mark Cuban’s world of paradise, as did we all). Such is the nature of major market corrections, the risk of which is magnified when buying single stocks. If you would have bought an overall market fund, such as the S&P 500, you’d be breaking even right now, after 7 years. So, yes, even overall market funds are not immune to the phenomenon of long bear periods. And 7 years of no growth is a massive hit to any retirement fund.

The solution to this is dollar cost averaging. Don’t dump everything you have in at once, do it in monthly installments. You will either be missing out on gains or avoiding losses during this period; either way you’re smoothing out your risk. Personally I looked at the overall market in 2001 after it got hammered and decided it was worth dumping everything I had in at once, and that decision paid off. But it could have just as easily gone the other way, so that was a risky move. If I were investing into a market upturn, especially one as stiff as in 98-2000, dollar cost averaging would be a must.

If you’re still not sold on the idea of long-term market investing, you can certainly take the risk of trying to outperform the market with your own stock picks. You could end up on top, or not. But it is a fact that the more often you trade, the less likely you are to stay on top of the overall market. The best fund managers in history struggle to outperform the market over long periods of time (20 years plus). When you take into account their management fees, in almost 100% of cases a plain old S&P index fund would have been the better option. As an individual investor, you’re faced with brokerage fees and tax payments that over time have a drastic effect on your gains. Every dollar you give the government or your stock broker today is a dollar that could be making you money in the longrun.

One thing is for sure, no matter what you do with your portfolio, there’s no excuse not to max out your Roth IRA every year with $4000 if you have that available to you. Tax free capital gains until retirement is simply unbeatable; think of it as magically adding 30% to your portfolio when you take it out.

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I live in Kaohsiung.

That’s completely understandable. Options trading, of which there are many different kinds of strategies, can seem a little overwhelming at first, but once you “get it” so to speak, it’s really not bad at all. I stick with the basics, which is buying call (make money when the underlying stock goes up) and put (make money when the underlying stock goes down) options, and then selling them back into the market when I’ve made a profit (as oppossed to “exercising” the option). There are many other “advanced” strategies which can help minimize your risk, but these add another layer of complexity into the mix and I’ve yet to dabble in them, as I’ve had no need to really.

Once you understand how options trading works, then its just a matter of picking the right stock to buy the options on, and choosing the right time to buy/sell - just as you would when buying stock normally. I’m oversimplifying it of course. There are a few other things to consider, particularly when choosing which option you buy (strike price, expiration date, over/under valuation of the option, etc).

If anybody would be interested, perhaps I can spend a little time writing up a little intro on basic options trading and the strategies that I use that have been working for me. Let me know. I don’t claim to be an expert by any stretch of the word, but I have been quite successful at it.

17

Vertigo, I’m definitely interested. I know almost nothing about options. Specifically can you explain how it differs from trading the stocks themselves other than the time-shift effect they have?

I’d also like to add that the prospect of learning about options trading from Inigo Montoya is pretty freaking cool… haha

18

All I can add here is that you buy when you hear the cannonballs fly, and you sell when you hear the violins sing.

Hype is dangerous.

If you are to do day trading, I would do my homework and do pair trades etc., backed up a solid quant analysis.

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[quote]If anybody would be interested, perhaps I can spend a little time writing up a little intro on basic options trading and the strategies that I use that have been working for me. Let me know. I don’t claim to be an expert by any stretch of the word, but I have been quite successful at it.
[/quote]

or you can tell what and when you buy and sell. :smiley:

20

“You seem a decent fellow…I hate to kill you.” LOL, what a great movie. You need to delete your temporary internet files though, Inigo got replaced with the V for Vendetta guy last week!

I can just invest my own money on your behalf, and if I win, give the profits to you, and if I lose, I’ll eat the loss. hahah…just kidding.

But seriously, I can start putting together some basic stuff to explain what options are and how they work and give you an idea of what has been working for me. There’s so much stuff to talk about ands it can be overwhelming so I’ll just keep it simple for now. Then once you get the gist of things it should be easy to pick up a book or go online and fill in the details (jdsmith you can dust off that book you bought last year and hopefully it will make more sense this time around).