Money Management & Happy New Year!

When I first started trading stocks, whether it was buy and hold or short-term trading, I had no clue about how to manage my money.  I just knew that I had to diversify because that's what everything I was reading was telling me.  I remember opening my first stock account with Etrade with $1000 and bought three stocks, PAYX, AMD and ISON.  Not only did I not have an investment/trading plan (entry, exit, target, etc), I had no idea how much I should allocate to each stock.  I just knew that I was going to buy these companies and hope that they were going to succeed, forcing their stock to go up.

Since then, I've learned to manage my money according to my risk tolerance and have set rules for maximum position sizes.

Rule #1: I will not invest more than 10% of my total trading capital in one position.

Rule #2: I will not loose more than 2.5% on any one position.

Rule #3: My maximum daily loss cannot be more than 1% of my portfolio. (Luckily, I've never had to satisfy this rule...knock on wood)

A few other general guidelines that I follow include:

-Don't try to win on all your trades. It's impossible, so accept the losses.  Its part of the strategy.

-As risk increases (bear markets, higher than desired entry, big market swings, etc), go with smaller positions to reduce your exposure.  Go with 1/4 or 1/2 size positions, if you feel like you still need to be in the game.


-Have a good reason for entering the trade/investment.  In other words, don't buy a stock just because you can or are bored.

-Sell partial positions as stocks increase to lock in profits.  Its better to lock in some profits than get none at all.

-Use stop losses and raise your stop loss positions as the stock value increases.

-Don't get attached to any stock or company, it may prevent you from selling at your target gains or losses.

-Ensure the risk/reward is in your favor by at least 3 to 1. For example, be willing to risk 5 cents for a potential gain of 15 cents.

Learn to survive in the stock market and the profits will follow.
Hope everyone has a great and prosperous 2012!
JP

Swing Trade Ideas CYT, BZH + Review MSFT, VRTX

Hi All,
The market is still very choppy from day to day and you never know what type of news your going to get from Europe to disrupt any short term momentum.  Since there is not clear indication of direction over the next couple weeks, its good to keep your positions small and don't get too greedy.  Look for low risk entries that allow you to get into a position and get out quick if it is working against you.  There have been a lot of failed breakouts...or a lot of volatility around the breakout that may stop you our quickly. Therefore, I've been looking to buy dips in stocks that are showing a short term uptrend and appear to be bouncing off of those trendlines.

Here are a few that I've played or are considering:

MSFT -  as noted in prior blogs, the stock is coming up to my first target.  Depending on how the stock acts, I may get out in the mid $26 range, around the upper trend line.  Closing above the 50ma should make that happen.

VRTX is a stock that i bought and sold last week, but could have more upside to it. I bought around $31.20 as it was breaking over some recent resistance and sold on Friday around $33.75.  It might be able to push to the $35 area, but i didn't want to take my chances since it moved over 10% in a short period

CYT - This is looking like a nice pattern that could bounce off its lower trend line and has clear overhead resistance that, if breaks, could lead to a move into the low $50s. Look for some strength on Monday. I'd buy on a break above Friday's highs with a stop around the lower trend line.

BZH - This stock formed a nice daily candle that bounced off its lower trend line. If we see a red to green move on Monday, or strength in the market, this could move to the top of trend line pretty fast.

Hope everyone has a good Christmas
JP

Position Update - MSFT, WM, AEN, AEA, SNTA, MEG, GMXR

Hello Everyone....Hope you all had a good week.

Thursday and Friday presented a nice pullback and recovery that could setup a end of year run to the 1300 area on the $SPX.  The pullback on Thursday, however, nearly had me stop out of my recent purchase of $WM as I thought it was breaking down and I didn't want to take a loss on it.  Luckily, the stock rebounded on Friday and closed up 3.5%, above its previous day's high.  I'm still looking for a $34 target on the stock.

$MSFT found support at its 200MA and is may continue to move toward our target in the $26 range. We'll see if the market will make that happen.

I had a few other good trades last week...$AEN busted loose and gave me about 20% from $1.12 to $1.35.  $SNTA had a good breakout run and yielded around 16% from $4.11 to $4.77. I took 7.5% from a swing trade in $AEA.  All three could see continuation, but I decided to take my profits, cause you never know what might happen from day to day.

I did take some small losses in $PEIX, $MX and $GLUU.

I took new swing positions in a few stocks

$MEG @ $4.04 Great looking breakout over resistance. Target $5-$5.50.  Stop at buy price.

$GMXR @ $1.66.  First target around 1.90...could go to 2.25. Stop around $1.62

Hope everyone has a good week.
JP

New Positions - MSFT, WM, AEA

Happy Weekend Everyone! I wanted to go over a few positions that I recently took.

On Nov 22nd, I wrote about a potential buy point in Microsoft around $24.55.  I took this trade in a small position, since the overall market was acting pretty sketchy during the Thanksgiving week.  It turns out that MSFT bounced right off its lower trend line and recovered a bit along with the overall market. My target is around $26.50 for around 9% gain.  We'll see if it gets there.  If things turn to the downside, I'll be stopping out below the bottom of the lower trend line.  It looks like there might be a pull back after last week.  Hopefully, it consolidates around $25 and moves upward to the top of the trend line.

There is a possibility that MSFT breaks the top trend line and accelerates through lateral resistance into the $30s.  We'll see what happens if we get there.

I also took a swing position in Waste Management at $30.25 on Nov 21st as I described in my prior post.  I got a bit worried as my position dipped briefly below $30, but rebounded off the lower trend line. Currently, its up against lateral resistance and the 50 dma. If it breaks through this area, we're looking pretty good for hitting my target, around $34, which is around the upper longer-term down trend and 200 dma. My stop is below recent lows rising trend line, around $29.50.

Lastly, I took another small position in Advance America (AEA) at $8.55 on Dec 1st.  I don't know much about the company, but the chart looks pretty sweet.  Its breaking some lateral resistance after five months of trading in a range. There is also a clean uptrend line from the lows in April.  My short term target is $10.  Since its a small position, I have a pretty loose stop below the rising trend line around $8.

Here are a few other charts that I'm keeping my eye on.

Trade smart & God bless!
JP

Keep an eye on Microsoft

Hi all!  Hope everyone is staying safe in all the market volatility.

I've been keeping an eye on MSFT since recently hitting the upper trend line. Now that its heading towards its lower long-term trend line, it might make for a low risk entry into this stock.  Buy around $24.50 with a stop around $24.  Risk $.50 for a $2-3 potential pop.

You can take ideas from other traders, but remember to trade your plan. Its your money. You press the buy and sell buttons. Understand the risk and don't forget to take profits!

Happy Thanksgiving to everyone!

Learn From My Mistakes

Last week, I took a vacation with the family.  I knew that I wouldn't have immediate access to a computer to trade anything.  I have a hand full of stocks that I plan on holding for the long term, like NLY and FE.  There was also a stock, FTWR, that I held because I sold most of my holdings from an earlier trade.  I was aware that I still held 200 shares, but felt the downside risk was minimal and there was the potential for a breakout over the upper trend line.  Unfortunately for me, they came out with a press release that they missed a loan payment....or, something like that.  The stock tanked around 60% over a couple days.  So, my plan is to watch and see if it recovers one of these days, as it is not really worth selling.

In hind-sight, I should have exited my entire position prior to leaving for an extended period of time. Luckily, the mistake was not too costly and won't break the bank.  But had that been a full position, I would be kicking myself pretty hard.

Stay safe out there. The market is still crazy.

Watch List for Week of 11/14/2011

Here are a few stocks that could be opportunities for swing trades next week.

WM near the bottom of the channel. If it breaks above the 50 sma, it could head towards the top of the channel. Target is around $35 or 200 sma. Stop around Nov lows ~$31.

VDSI is flagging after a high volume breakout. Support around $8. Target $10. Stop at the recent lows.

PPP flagging after recent breakout. If it breaks over recent highs, it could head to fill the gap around $4.25. Might need to time to develop the flag.

Buy & Hold

The goal for anyone investing is to make a profit.  A lot of times that profit doesn't come immediately.  Patience is an important part of investing.  When I first got into buying stocks, I only bought to hold for long-term gains (more than one year).  I made some good profits using the buy & hold method, but also took some pretty nasty losses by not having an exit plan. I still buy & hold a portion of my portfolio because it provides some stability and income to my investing.

Over the long run, the stock market has trended up.  This is a good argument for buying high quality stocks and holding them for more than a year to take advantage of annual gains and/or dividends.  My strategy for buying & holding is to research high quality stocks and diversify money into a handful them.  Have a realistic profit target in mind. Likewise, establish a stop point where you will get out of a position if the fundamental picture of the stock changes.

I currently hold mostly stable dividend paying stocks for a longer term perspective.  $FE, $NLY, $COP, $ABT and $T are some stocks I've held over the last couple years.  Some examples of a buy & holds that didn't work out too well -- I bought $BP a month before they had the rig blow up in the gulf.  The day I heard of their problems, I sold for a small loss, which turned out like a good decision.  Another stock $SBAY I got into early on and followed the promise of a growing Chinese economy and internet user base.  I started with a small position but continued to add as it dropped to what I thought was a bargain. I still hold 150 shares at around .07 cents each....not worth selling so I'll continue to hold...but down a lot more than I want to be.

Where I've had success in the buy & hold strategy is researching, understanding the overall market trend, understanding the trend of the stock and buying in when I feel there is a good risk/reward.  I also have an exit plan that I stick with, both profit and stop loss targets.  No one will always buy the low and sell at the absolute high of any trend, but if you can get a good piece of the move, you can be profitable.

~JP

Blog Post #1 - Purpose

Yo! This is my first blog post! My goal is to post lessons I learned from my investing experiences and expose some potential opportunities. Hopefully, some folks can benefit. Enjoy!
~JP