Stock trading thread

Sarvis · Postby **Sarvis** » Mon May 18, 2009 5:54 pm

The ONLY thing I know about buying on margin is that Zoidberg wanted to do it, and considering he traded all his stock for a sandwich I'm thinking margin trading is a bad thing. ;)

Corth · Postby **Corth** » Mon May 18, 2009 5:57 pm

Margin is just a fancy word for a loan from the broker. The reason you have a 3 day waiting period is that it takes 3 days to settle the transaction and get your cash. If you have margin account you are essentially borrowing money so that you can trade before those 3 days are up. And of course you would pay 3 days of interest on the money. Likewise, with a margin account you could borrow money and buy stock even if you have already spent all your money. So your $1,000 account might allow you to control $1,500 in stock, or whatever the margin limits are.

Basically, if paying 3 days of interest on the money is worth it for you to avoid the 3 day waiting period, its worth doing.

Sarvis · Postby **Sarvis** » Mon May 18, 2009 6:12 pm

Seems like it could add even more risk though. If the stock doesn't go up, you're not even getting the money back you borrowed and then you lose the interest on top of that. Could be useful, but would have to be careful with it.

Will still stay away for now.

Corth · Postby **Corth** » Mon May 18, 2009 6:18 pm

Hrmm no. Effectively what it would accomplish is that you would be able to trade without the 3 day waiting period, and just pay interest during the 3 days. If you make or lose money on the trade that has nothing to do with the margin. As long as you are not exceeding the balance in your account what it simply allows you to do is access your money now rather than wait 3 days. There is no additional leverage and thus no additional risk. The 3x lever of those ETF's you're trading is adding significant risk.. not the margin.

There might be very important psychological reasons not to get the margin account. Perhaps having to deal with a 3 day waiting period makes you into a better trader. You wait for very good entry points because you know that you won't have many opportunities to get in. That sort of thing.

Sarvis · Postby **Sarvis** » Mon May 18, 2009 6:30 pm

Corth, if you lose money on the trade you lose more money than you would have. I understand it doesn't change the actual chances of gaining or losing money... well, it does in the same way transaction fees do actually... but it's increased risk in the sense that you can lose more, and will gain less.

Corth · Postby **Corth** » Mon May 18, 2009 7:01 pm

Perhaps I am misunderstanding you - but I don't see how it makes a difference where the money comes from with respect to your winnings and losses from a trade. The trade doesn't care where the money came from. You either win or you lose on it. If lose $100 on the trade, how does it make a difference if you lost $100 of the cash in your account, or $100 of the money you owe Ameritrade? Ultimately that $100 loss is yours any way you look at it.

The only difference is that if you borrow money to make the trade, you pay interest on that money. Typical margin interest right now is about 8%. That would cost you about 22 cents a day in interest on $1,000. These are single day trades that you are doing. Considering that you are paying $20 in transaction fees to get in and out in one day, I hardly think the additional 22 cents for the margin makes any type of substantial difference in the amount of risk you are taking. Certainly its an inconsequential amount when compared to the ups and downs of a 3X leveraged ETF.

Sarvis · Postby **Sarvis** » Mon May 18, 2009 7:10 pm

Corth, let's break down that $100 trade shall we?

$100 stock + $10 commission.

The stock has to go up 10% before I even break even, yes? Without the commission, even a 1% increase would be profit for me. The risk was increased, yes?

Now let's buy on margin:

$100 stock + $10 + 1% margin interest = $111

The stock now has to go up 10.1% before I make a profit, right?

The margin interest can make you lose money even when the stock goes up.

We established earlier that I'm going to have a harder time with this because the commission is such a large percentage of my trades, therefore I'm trading with more risk. I can lose even if the stock goes up. The margin increases the price of the trade, meaning the stock has to move even more before I win.

Really Corth, this isn't that complicated.

Corth · Postby **Corth** » Mon May 18, 2009 7:13 pm

Not 1% margin interest per day. Around 8% per year.

On $100 your margin interest for 1 day would be 2.2 cents. So by your example, it would be $100 for the stock, $10 for the commission, and 2.2 cents for the margin.

That 2.2 cents is going to keep you from entering into a trade if the stars are aligned... but the $10 commission doesnt? Actually, its $20 in commissions because you have to sell the stock too. So $20 in commissions - you go forward with the trade. $20 in commissions and 2.2 cents in margin.. thats a dealbreaker.

You made a great example of why its foolish to make small trades with a $10 commission broker. You didn't show why using a margin to avoid the 3 day waiting period increases your risk by any noticeable amount.

Sarvis · Postby **Sarvis** » Mon May 18, 2009 7:33 pm

Corth wrote:Not 1% margin interest per day. Around 8% per year.

On $100 your margin interest for 1 day would be 2.2 cents. So by your example, it would be $100 for the stock, $10 for the commission, and 2.2 cents for the margin.

That 2.2 cents is going to keep you from entering into a trade if the stars are aligned... but the $10 commission doesnt? Actually, its $20 in commissions because you have to sell the stock too. So $20 in commissions - you go forward with the trade. $20 in commissions and 2.2 cents in margin.. thats a dealbreaker.

You made a great example of why its foolish to make small trades with a $10 commission broker. You didn't show why using a margin to avoid the 3 day waiting period increases your risk by any noticeable amount.

I didn't know what the interest rate was, but whatever... you're right because the extra money lost is small enough for you to not care about as long as you get to be "right."

Sarvis · Postby **Sarvis** » Mon May 18, 2009 8:25 pm

I do have to admit that today would have been a nice time to try it though. At least as some consolation my instincts were right...

Ragorn · Postby **Ragorn** » Mon May 18, 2009 11:03 pm

I didn't know what the interest rate was, but whatever... you're right because the extra money lost is small enough for you to not care about as long as you get to be "right."

There's a huge risk in buying on margin, but it has nothing to do with the 2.2 cents you pay in interest. Corth's right about the figure ... but that's not why you should avoid trading on margin.

The risk is literally... THE BROKER WILL LEND YOU MONEY TO TRADE. So if you have $1000 in your account, the broker will actually let you buy $4000 worth of stock. If you look at that on its face, it's a great deal... now you're trading $4000 for the same $10 commission that you used to pay on your $1000. But oh god... what if the stock goes down 5%?

$4000 buy
-5% = -200
Commissions = -20

You just lost 220, or 22% of your original investment... ON A -5% DAY.

Holy crap!

Don't trade on margin.

Sarvis · Postby **Sarvis** » Tue May 19, 2009 2:41 am

Ragorn wrote:
I didn't know what the interest rate was, but whatever... you're right because the extra money lost is small enough for you to not care about as long as you get to be "right."

There's a huge risk in buying on margin, but it has nothing to do with the 2.2 cents you pay in interest. Corth's right about the figure ... but that's not why you should avoid trading on margin.

The risk is literally... THE BROKER WILL LEND YOU MONEY TO TRADE. So if you have $1000 in your account, the broker will actually let you buy $4000 worth of stock. If you look at that on its face, it's a great deal... now you're trading $4000 for the same $10 commission that you used to pay on your $1000. But oh god... what if the stock goes down 5%?

$4000 buy
-5% = -200
Commissions = -20

You just lost 220, or 22% of your original investment... ON A -5% DAY.

Holy crap!

Don't trade on margin.

You know, that's originally what I meant... Corth managed to sidetrack me into the interest discussion. Bleh.

Corth · Postby **Corth** » Tue May 19, 2009 3:32 am

No..

I was not talking about using more than your account balance to trade. I was discussing the issue of the 3 day waiting period. If you have $1,000 in your account you can use the margin to simply trade $1,000 while that money is held up for settlement. There is no additional risk because the amount of money you are using is the balance of your acccount. I'm not saying trade $4,000 on a $1,000 account. I am saying trade $1,000 on a $1,000 account and avoid having to wait 3 days to trade. The only additional risk is the interest on the margin.

That being said, why not trade $4,000 on your $1,000 account (other than the fact that you aren't allowed to get such high margins)?

You are already at 3 to 1 leverage by virtue of the ETF you are trading. Why not lever it up a lot more? More risk and more reward. Your saying a 3 to 1 leverage ratio is great, but 4 to 1 isn't? Or 5 to 1? Where is the line drawn for too much leverage?

Ragorn's own example.. You have $1,000 in your account. If you invest it in the financial index and it goes down 5%, you lose $50. If you invest it in the 3X long financial ETF and that index goes down 5%, the ETF will be down 15%, and you lost $150, or 15% of your account balance. The leverage from those ETF's you are using is not in any way different from the leverage you get from margins. Ragorn's logic makes as much sense against using levered ETF's as it does against using margin.

It would seem to me that using margin to invest a multiple of the $1,000 in his account would make a lot of sense for Sarvis to get around the inherent problem of commissions costing 2% of each trade he makes. Even Ragorn day trading $6,000 with $20 in fees for a round trip is kind of silly. Sarvis day trading $1,000 with $20 in fees is absurd. With margins he could reduce the percentage of his trade that is a guaranteed loss to commission.

fobble · Postby **fobble** » Tue May 19, 2009 1:42 pm

Just curious Sarvis, why not use Scottrade? It's $ 500 min to open, $ 7 a trade (online) for stocks, and $ 2,000 min (if you want to use margin). Also I think they still do 7? free trade if you open an account as referral from someone who already has scottrade.

$ 10 bucks a trade is very hefty if your fund is $ 1,000.

Sarvis · Postby **Sarvis** » Tue May 19, 2009 2:56 pm

I honestly don't remember why I chose Sharebuilder. I checked out several before settling on them, but I can't remember why...

fobble · Postby **fobble** » Tue May 19, 2009 3:53 pm

Sarvis if you are planning to take 2-3 weekdays off sometime from trading for a break (vacation, family visit, etc.). I'd recommend it may be worth your while to revisit online brokerages and consider setting up a switch while you are not actively trading for those days. It may sound like I'm knit picking however a difference of say even $3 per transaction cost will add up considerably and make a difference in return at your fund level.

Last note, everyone will have their own outlook, advice, and style. It's ultimately it's on you on how you decide to absorb these inputs and feedbacks to a use. I will also add that I'm learning a lot just reading these discussions between you, Corth, and Ragorn.

Ragorn · Postby **Ragorn** » Thu May 21, 2009 3:09 pm

FAS indicators were pretty good this morning... 4% gap downwards, holding pretty steady, no major government or financial news to tank the market. Unfortunately I'm working very long hours this week and I don't have the time to track stocks as stringently as I normally would, so I made a play for some very short-term, quick profit this morning.

In at 8.73. Price spiked up near $9 very early and started falling a bit. I looked at the financials, DOW down 130 points, everything on my board red... not particularly safe indicators of a growth day. Sold at 8.92, made around 2%.

Not a huge day, but I still netted more dollars in 20 minutes of trading than I'll make all day at my salaried job.

Sarvis · Postby **Sarvis** » Thu May 21, 2009 3:14 pm

Why is a 4% gap downwards a good sign? Shouldn't a downwards trend in post/pre-market indicate the stock is likely to continue falling?

I thought about buying FAZ, but had no confidence in the decision so stayed away. So far glad I did, it doesn't look like things are going to move much at all... and I need a bigger gain than 3% after fees.

Will probably look at Scottrade and Ameritrade this weekend and move my accounts over before I actually take another shot at this...

EDIT: Hey, is there a way to move your stock from one broker to another without selling and rebuying? I've got half my money in GE as the long term investment, but I don't want to keep the Sharebuilder account open just for that one stock...

Ragorn · Postby **Ragorn** » Thu May 21, 2009 4:31 pm

Earlier in the thread I talked a little bit about the "filling the gap" strategy. The theory behind it states that whenever the market sees a sudden, sizable shift in stock value (called a gap), that it will correct itself in the short term. So if a stock closes at 9.40 and opens the next morning at 8.70, that's a gap. And in theory, when trading opens, that stock's initial movement will be UPWARDS to try to recover the value it lost in the gap. It's not 100%, and it doesn't always reach the pre-gap value, but odds are better than average that if you find these negative gaps and use them to play short-term, you'll probably stand to make some money.

That's one of the reasons I like these FAS/FAZ ETFs. They almost always gap overnight, and there's a host of data on the google finance forums tracking FAS's gaps. All the data says, if you try to fill the morning gaps in FAS, you WILL make money in the long run.

Corth · Postby **Corth** » Thu May 21, 2009 6:00 pm

My commodity stocks have been ridiculously strong for quite a while now. Even on a pretty lousy day for the broad market I am up. I am tempted to go all cash and just wait out the inevitable correction - but with this kind of strength I just don't have the guts to do it. If I hadn't sold some of my holdings about a month ago I'd be up an extra $6,000 right now. Will probably end up riding it back down, which is fine, as I plan to buy a lot more there.

Corth · Postby **Corth** » Fri May 29, 2009 3:50 pm

Lightened up on my commodity positions again today. I am up about 40% for the year. I previously lightened my positions in early April and again in early May. I am now about 20% invested, which is about as low as I expect to be. Hoping to be 100% invested at some point when commodity producers make new lows. Will gradually buy in as the market starts to correct.

Ragorn · Postby **Ragorn** » Fri May 29, 2009 5:29 pm

Very nice.

Haven't had any time to play this week... and when I don't have time to watch, I don't invest in financial stocks. So I'm in cash right now. Also enjoying watching GM's stock crash through the carpet.

Kifle · Postby **Kifle** » Sat May 30, 2009 12:30 am

I have a question concerning that GM stock -- well sort of. If a company goes bankrupt, what happens to their stock? Does it drop to $0 and disappear? What if the company restructures like Zenith did in the late 90's? Basically, if GMs stock falls to ~$.01/share, and you buy and the company files bankruptcy to restructure like the government wants, do you lose all money and then do they resaturate the market with "new stock"?

Corth · Postby **Corth** » Sat May 30, 2009 1:08 am

Yeah.. new stock gets issued in the restructured company.

fobble · Postby **fobble** » Sat May 30, 2009 12:25 pm

Depending on restructuring and result of the company. One way companies do this (ie: Chrysler) is while under court protection (bankruptcy), they'll create a new organization and sell off all their worthwhile assets to that new company. In this case, stocks of existing companies is worth nothing and don't get any conversion stocks.

Sarvis · Postby **Sarvis** » Mon Jun 01, 2009 6:55 pm

Well, I'm certainly no Corth but I did ok over the last couple days...

5/28 Bought FAS at 9.10
6/1 Sold FAS at 10.65

Came back from lunch, saw it had climbed to 10.75 and decided it might be a good idea to set a stop-loss. Good call, as it dropped to 10.30 while I was in a meeting.

Ok, it's only an $89 profit.. but I'm still happy. :)

Ragorn · Postby **Ragorn** » Mon Jun 01, 2009 11:36 pm

Grats, Sarvis!

I've been out for over a week, still too busy to track as closely as I'd like.

fobble · Postby **fobble** » Mon Jun 15, 2009 4:06 pm

Stock Market is sinking like Titanic...well I guess that's drastic comparison. Anyhow, I hope you guys are weathering this well. I'm switching back to buy-and-hold for large chunk of me money.

Oh and Sarvis, if you get a referral from someone using Scottrade already. You and the referrer get 3 free trades each when you open a new account using the referral code. If you are seriously going to continue investing, use this downtime in sinking market to switch brokerage. Just my two cents, I hope it helps.

Sarvis · Postby **Sarvis** » Mon Jun 15, 2009 4:13 pm

fobble wrote:Stock Market is sinking like Titanic...well I guess that's drastic comparison. Anyhow, I hope you guys are weathering this well. I'm switching back to buy-and-hold for large chunk of me money.

Oh and Sarvis, if you get a referral from someone using Scottrade already. You and the referrer get 3 free trades each when you open a new account using the referral code. If you are seriously going to continue investing, use this downtime in sinking market to switch brokerage. Just my two cents, I hope it helps.

I actually signed up with Scottrade over the weekend... still have to get everything switched over though.

The only stock I'm holding right now is GE, wish I had had the foresight to sell Friday... heh.

Ragorn · Postby **Ragorn** » Mon Jun 15, 2009 4:33 pm

It's a down day, I'm not sure that this is the start of a trend or the sign of anything horrendous.

I've actually adjusted my strategy over the past week or so. Playing the ETFs (FAS, FAZ) is no longer strictly profitable... the wild variance has died down a little, and the norm has been +/- 3 or 4% each day rather than 7-9%. Trying to guess which direction the market is going on a day-to-day basis has stopped yielding fruit. On the contrary, certain financial stocks (Morgan Stanley and Bank of America in particular) have been on long upward climbs even while the ETFs can't seem to grind out a profit.

I'm not 100% confident that we're on a permanent climb, and I can't say for sure that there won't be a big correction. However, a lot of indicators are pointing to more stability and less volatility in the market. The time to favor day trading over long term investing may be coming to an end. So, to that effect, I started my long strategy today. I partitioned a piece of my investment fund that I won't need to cash out in an emergency, and I pushed it into Bank of America. I'm going to treat this as a long play, so rather than fret about the ups and downs of the stock price, I'm going to look back in a couple months and see where it's taken me. BAC isn't necessarily out of the woods, but there's a lot of very solid optimism behind them as an economy leader coming out of the recession in the next couple years.

I may set a stop loss for something like -10%, just in case the market starts correcting hard. If that stop loss triggers, I'll buy back in later at a lower price point and ride the resulting recovery.

Kifle · Postby **Kifle** » Mon Jun 15, 2009 4:43 pm

In regards to your EFTs in general, what would you say is a good swing-rate to start looking at a stock to day-trade? In other words, what percentage change throughout most days is "safe" (and I use that loosely) and how long should you watch those changes before you start buying? So, if I were to see a stock change 5-6% in a day over the course of a 4 day period, would that be an indication to start playing with it, or would it be a better idea to look for a stock with a higher percentage shift for a longer period of time (say the 7-9% over the course of a week or two)?

Corth · Postby **Corth** » Mon Jun 15, 2009 4:48 pm

Hoping this is the start of the long awaited correction. Lots of cash on the sidelines waiting for bargains.

Ragorn · Postby **Ragorn** » Mon Jun 15, 2009 6:21 pm

Corth wrote:Hoping this is the start of the long awaited correction. Lots of cash on the sidelines waiting for bargains.

Hah... I sure hope not :D I got a little impatient of waiting day after day, week over week, while stocks rose in the face of the impending correction. So many -100 and -200 days that washed out a day or two later, so many +5-8% days for the financials. It can't go up forever, but the correction is being a bit sluggish in coming... here's hoping that the trend holds a bit.

I'll have to keep a close eye on the indicators though... really don't want to have waited 2 months for a correction only to get burned on the first day ;)

In regards to your EFTs in general, what would you say is a good swing-rate to start looking at a stock to day-trade? In other words, what percentage change throughout most days is "safe" (and I use that loosely) and how long should you watch those changes before you start buying? So, if I were to see a stock change 5-6% in a day over the course of a 4 day period, would that be an indication to start playing with it, or would it be a better idea to look for a stock with a higher percentage shift for a longer period of time (say the 7-9% over the course of a week or two)?

Uh, tough question. Depends on your strategy. I felt safe with 6-8% swings because I was playing the morning gaps and setting my stop loss for -2%... what that means is, on any given day I either gain 6% or lose 2%... so I only have to be right 1/3rd of the time to make a profit. With volatility down and ETFs really only cashing in 2-4% gains on a given day, you really have to be right a lot more in order to cash in.

Ragorn · Postby **Ragorn** » Mon Jun 15, 2009 7:24 pm

I bought into BAC at $13.37 by the way. Part of me couldn't resist ;)

fobble · Postby **fobble** » Mon Jun 15, 2009 7:25 pm

Corth wrote:Hoping this is the start of the long awaited correction. Lots of cash on the sidelines waiting for bargains.

Any particular companies you are keeping track of?

Sarvis · Postby **Sarvis** » Mon Jun 15, 2009 7:28 pm

Ragorn wrote:I bought into BAC at $13.37 by the way. Part of me couldn't resist ;)

It was even lower than this 2 days ago... not sure I'd expect it to go up from here strongly. Also every spike in volume seems to coincide with a price drop today... I'll stick to waiting for now... :P

fobble · Postby **fobble** » Mon Jun 15, 2009 7:45 pm

Purchased more MVL.

If I was a risk taker and have brass balls, I'd invest in Chinese or foreign firms focused in China in transportation sector...not the manufacturer but related services. China has one of the highest savings in the world which means they got the cash in bank to spend while us Americans got nothing in bank and owe money! Question is what will Chinese spend some of those savings on and when. My guess would be travel and in order to travel ya need transportation and its related services (ticketing websites, airline carriers, bus services, etc.).

Anyhow, I don't have the balls and don't know that market at all so I'm too chicken to put me money there.

I hope next line of MVL movies don't experience further slowdown, financing problems, or just sucking in general...

Ragorn · Postby **Ragorn** » Mon Jun 15, 2009 8:08 pm

Sarvis wrote:
Ragorn wrote:I bought into BAC at $13.37 by the way. Part of me couldn't resist ;)

It was even lower than this 2 days ago... not sure I'd expect it to go up from here strongly. Also every spike in volume seems to coincide with a price drop today... I'll stick to waiting for now... :P

Yeah, that's the thing about BAC... for the last two months, it's been consistently outperforming the market, even going so far as to be up on red days. If you're going to get on the boat, you have to get on some time... I got burned watching BAC climb from $2.87 all the way up to where it is because I thought "surely this stock will correct and dip back to previous lows." I even owned 1000 shares of BAC at $7.97, which I sold for a tidy profit... but what if I'd kept them?

Corth · Postby **Corth** » Mon Jun 15, 2009 8:49 pm

Fobble,

I only invest in a few different companies. SU and COSWF are big Canadian oil sands plays. LINE is a US natural gas and oil producing company with a nice dividend yield and fully hedged through 2011. CEF has physical gold and silver in a vault in Canada (I try and keep my money out of US companies because of political risk and also as a hedge against the dollar). RJA is an ETF of agricultural commodity producers.

I have one financial, NYB, which is a company that specializes in lending on rent stabilized and rent controlled buildings in NY. They were very conservative during the boom, always focusing on cash flow rather than anticipated appreciation when underwriting loans. They have a nice dividend yield and I think they were unfairly crushed when all the boom banks got crushed.

I also have a Chinese ETF in one of my retirement accounts, I don't recall the ticker letters. I have a small investment in the Hussman mutual fund in my personal account and my son's college account, and another small investment in a mutual fund called PSAFX which is basically metals and foreign currencies (hedge against dollar).

As I said before, I am only about 20% invested right now. Actually, I guess you could say 80% of my money is invested in the US dollar. Since I expect the dollar to resume its trip to worthlessness within the next several years, I plan on spending those dollars either on a house or towards commodity producers once the market corrects.

Kifle · Postby **Kifle** » Tue Jun 16, 2009 8:13 am

Corth wrote:and fully hedged through 2011.

Sorry about the retarded questions, but this stuff is very interesting to me, and I would like to build a nice knowledge base so I can put my money to better use in the next few years after I buy a house (saving for a downpayment atm). Anyway, what is fully hedged mean with regards to a company? I understand the idea of "hedging bets" and your later explanation of hedging against the US dollar, but I don't see how it applies to an entire company -- unless you mean that their investments would fully hedge against a full loss due to product/service sales.

Corth · Postby **Corth** » Tue Jun 16, 2009 9:19 am

In this case, 'fully hedged' means that the company has absolutely no exposure to market prices. They sold all of their future production through 2011 on the commodity markets when prices were a lot higher than they are now.

Sarvis · Postby **Sarvis** » Tue Jun 16, 2009 6:05 pm

Ragorn wrote:
Sarvis wrote:
Ragorn wrote:I bought into BAC at $13.37 by the way. Part of me couldn't resist ;)

It was even lower than this 2 days ago... not sure I'd expect it to go up from here strongly. Also every spike in volume seems to coincide with a price drop today... I'll stick to waiting for now... :P

Yeah, that's the thing about BAC... for the last two months, it's been consistently outperforming the market, even going so far as to be up on red days. If you're going to get on the boat, you have to get on some time... I got burned watching BAC climb from $2.87 all the way up to where it is because I thought "surely this stock will correct and dip back to previous lows." I even owned 1000 shares of BAC at $7.97, which I sold for a tidy profit... but what if I'd kept them?

At some point I need to stop just listening to what you guys are doing, but after you brought up BAC I tried applying some of my recently gained knowledge to it. (Have been reading a book on investing over the last couple weeks... you know, between dates and emotional breakdowns ;) )

The short version is that you can draw a line between lows, and thus estimate where the "floor" of the stock is going to be. Looking at BAC from it's lowest point in march through today, such a line is just about lined up with the current price... and the overall trend is definitely upwards... so I think you might be right, but your timing was a bit off.

In other words, I'm in at $12.86...

(Join us tomorrow when I find out I should have read the next chapter before buying BAC!)

Corth · Postby **Corth** » Tue Jun 16, 2009 7:18 pm

Hrmm, I wouldn't be surprised if Sarvis turns into a fairly good technical trader if he gives it enough time and has enough discipline to really study it in depth. Might not be such a bad time to give it a shot either with so little money at stake. You will lose money, of course, Sarvis, but it might be well worth it.

Sarvis · Postby **Sarvis** » Tue Jun 16, 2009 7:26 pm

Corth wrote: You will lose money, of course, Sarvis...

Gee, thanks.

, but it might be well worth it.

But at least you're finally admitting I was right. :P

Corth · Postby **Corth** » Tue Jun 16, 2009 7:56 pm

I was actually being serious. You are a typical IT type person. Technical analysis is more rules based and would appeal to your personality. Its all about probabilities. X percent of the time, if the chart presents in this way, then that will happen.

Sarvis · Postby **Sarvis** » Tue Jun 16, 2009 8:00 pm

I knew you were being serious, but you still just told me I'd lose money... it's like predicting I'll screw up my next date. You'd be right, but I still don't want to hear it! ;)

Incidentally, the upticks in volume are starting to coincide with price increases now... not big ones, but I _think_ it might be turning around soon.

I'm kind of guessing on that bit though...

Corth · Postby **Corth** » Wed Jun 17, 2009 1:38 am

I wasn't clear about that. You would lose money for a while until you realized there is a lot more to it than drawing a few lines on the charts to find a 'floor'.

Sarvis · Postby **Sarvis** » Wed Jun 17, 2009 1:52 am

Corth wrote:I wasn't clear about that. You would lose money for a while until you realized there is a lot more to it than drawing a few lines on the charts to find a 'floor'.

I know that, which is why I was also looking at the volume, the overall trend YTD and Rags' comments. I also understand that even as an indicator you're just giving yourself a better chance, things can still go against the indicators and I need to keep an eye on that as well as other things to keep up with what's happening.

The book covers "short term trading" which includes both day trading and what is called (iirc) Position Trading. The important difference here is that position trading is something you hold for several weeks at a time, so you don't need to constantly monitor things or try to make money in the margins as Rags' was. Much better for my trading style... however at this point it hasn't discussed how you look at the indicators differently when doing the different kinds of trading styles. :(

Corth · Postby **Corth** » Wed Jun 17, 2009 5:44 am

There are some basic patterns that you can learn about that show up on the charts. The most famous one, for instance, is the 'head and shoulders' pattern which is bearish, although in its reverse form its bullish. The interesting thing is that you can use these patterns in different time frames to more or less the same effect. So for instance, if you are looking at an intraday chart, its a very short time frame, but the patterns that arise would in many cases be interpreted the same as patterns on a chart for the past 5 years. It just plays out at different speeds, but the TA is the same.

The fascinating thing about stock charts is that in a very real way they are a measure of human psychology. Human emotions of greed and fear drive the sales and purchases of stock by thousands or millions of participants, which drive the market up or down. The TA patterns, such as the head and shoulders formation, are literally a representation of this mass human psychology - which have predictable results (hence their utility).

When you get past the basic chart formations, there is a lifetime worth of stuff to learn. Dozens of schools of thought, theories, etc. You could spend a couple of years learning about Elliot Wave theory and then just kind of put it in your back pocket while you learn something else that may or may not offer contradictory results. In the end you need to learn as much as you can and attempt to synthesize all that information into some sort of cohesive trading strategy.

Personally, I have never been very good at reading charts or, really, trading at all. I consider myself more of an investor than a trader. Even to this day, usually I get hurt when I get too cute and think I can do something in the short term. To some extent, knowing your own personal strengths and weaknesses is the biggest hurdle.

shalath · Postby **shalath** » Wed Jun 17, 2009 10:55 am

Ragorn wrote:I partitioned a piece of my investment fund that I won't need to cash out in an emergency, and I pushed it into Bank of America. I'm going to treat this as a long play, so rather than fret about the ups and downs of the stock price, I'm going to look back in a couple months and see where it's taken me. BAC isn't necessarily out of the woods, but there's a lot of very solid optimism behind them as an economy leader coming out of the recession in the next couple years.

Bank Of America file for Chapter 11 Bankruptcy Protection!! :-(

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