Quote: (12-16-2010 01:40 PM)Chaz Wrote:
young_money,
are you an "active trader" then? how often are you making trades? Daily? Do you actually have an edge doing that? (I have heard that most of the folks doing this do not really have an edge at that game, especially taking into account commissions and short-term capital gains tax) And how did you lose 60K in the market? I would not be interested in losing any money whatsoever, let alone 60K.
I prefer to buy and hold something solid over the long run, and not pay any attention to the markets. In other words, truly passive income, no bs with buying and selling stuff every day or week. Apple stock has been great over the last year, but can we do better than Apple for 2011 or 2012? I would like to think so.
At the time, I had just made about $200K on a business venture and foolishly bought stock and long term options on what I considered solid investments, which included gold mining stocks, Google, etc. Needless to say, they did not pan out.
As you know, the market has changed and even great companies and rising commodities can take it on the chin for an extended period of time. Higher than usual volatility will be here for a while, because the majority of people are rightfully skeptical of the US recovery. This volatility can be your friend or worst enemy. Don't be fooled by the recent 3 month run in the markets. They are just trying to grab every sucker around until the end of the year, and then it will be back to higher volatility.
Now, I am not recommending day trading by any means. This is much worse that buying and holding a group of diversified stocks, although there is not a large chance that you will make much profit with that strategy unless you just get lucky.
The real key to making money now is in tracking market sentiment and being able to identify when everyone is a little too pessimistic or a little too optimistic in the markets overall. Looking at a chart of the SPX, what would you say today? Let me assure you, we are overbought. Check out the full stochastics at the bottom of the chart. Riding a little high, don't you think?
Besides technical indicators, I subscribe to a service that tracks basically every market indicator in existence and gives me an idea of what is really happening behind the scenes.
Now once you know which way the wind is blowing, now you have any idea of how to invest, short or long. This is where you want to start tracking reliable stocks that always seem to come and go with the overall index. A good example is NFLX, CMG, AMZN, DECK, etc. How many times could you make 10% on your money just by buying NFXL when the full Sto's are around 20 and selling when they hit 80? And this strategy works for stocks that are trending up, down, or sideways. You just need some volatility and the ability to track it.
Find stocks that are leaders in their industry, that tend to follow trend channel support and resistance that you can buy and sell every 3 to 6 weeks for a 10% profit. And always put your stop loss in immediately after you buy, right below trend channel resistance or the 50 day moving average. This should take care of limiting your losses if the SPX falls out the first week of January and the leaders take a bit hit.
Also, you are correct about commissions cutting into your profits. I almost never spend more than $5 on a stock or options trade. Use optionshouse dot com. I also don't spend more than 20 minutes a day watching the markets. I learned most of this from the company that sends me trigger alerts when it's time to buy and time to sell.
P.S.- If you can't tell already, it's time to buy NFLX. Set your stop loss just below the green line.