Your Questions About How To Pick Stocks

Lisa asks…

Want to become a stock trader? How?

I currently live in the hudson valley in Ny and am a junior in high school

My dream job is to become a stock trader but I lack the knowledge of how to become one

My grandpa has been a very successful on the side trader using the money he made from his job and he’s showed me almost everything you need to know about picking stocks

I use value line mostly and have a practice portfolio that has performed exceedingly well, my original choice of occupation was to become a CPA but after he saw how well I was at picking stocks he suggested that i become a trader… I’m certain it’s not beginners luck i’ve been picking stocks for awhile now…

Things i’d like to know
– Colleges? I know you don’t need college degree to become a trader but i was thinking of taking a lot of math classes so that i could become a trader and as a back up become a cpa. Mostly accounting, Statistics, finance… etc
– Salary and or commission, percentages?
– Hours, probably when the market opens and closes
– what stocks i’d be trading, not really sure if they give you funds and you trade them for a brokerage company… like they give you someones 401k or a retirement fund, i’m just not sure what i’d specifically be trading
How hard are jobs to find as a trader or broker ( I 100% want to be a trader)
– work with brokerage firms or banks

I don not want to become a day trader, i trade stocks and hold them for short term and long term

John answers:

“Things for you to know”
No you do not need a college degree to be trader, Typical traits of a trader – usually above average intelligence, out going personalities, good at math and not wrapped too tight.
Traders are paid only an average salary (some are not paid any salaries) they do however share in the profits of the trading operations – they do not share in the “gross” profit but only in the “net” profit.
If you have ask about the working hours for any job, you should not have the job.
If you work for a firm, they will tell you what you can and can not trade.
The job is not hard but you do have to work at it.

To be a trader you must first learn how to invest. You must know the products and the markets in which they trade, how security transactions are cleared and more importantly you must know the rules that govern those products and markets. So you must know what you’re doing, why you’re doing it, and how to do it. You should start by reading “Investing for Dummies” by Eric Tyson.

Here’s a list of books you should consider, at least read half of them
Bulls Make Money, Bears Make Money, Pigs Get Slaughtered, by Gallea
How to Trade in Stocks, Jesse Livermore
Millionaire Traders, Lein & Schlosberg
One Up on Wall Street by Peter Lynch
Reminiscences of a Stock Operator, Edwin Lefevre
The Disciplined Trader, Mark Douglas
Trader Vic-Methods of a Wall Street Master, Victor Sperandeo
Trader Vic II-Principles of Professional Speculation, Victor Sperandeo
Trading for a Living, by Alexander Elder
Trading in the Zone, Mark Douglas

And when you think you want to trade, try some paper trading to test your skills without spending you money

Before you enter your first order you need to address four major policies and have very strong discipline to follow them
1 – You need a written sound trading/investment plan with rules that will not only help you but more importantly protect you, mostly from yourself. Always use stops either to protect you on the down side or to lock in profits on the up side. Never trade on emotions, when emotions get involved walk away. Don’t try to out-smart the market, you’ll loose but if you always take what the market is willing to give you, you’ll be successful. Other words, you don’t trade against the trend since the market is always right. And NEVER trade on emotions, once you let emotions in your trades you will loose
2 – A written money management program is essential. Remember never invest 100% of your capital into any one security and never have 100% of your capital invested. Never go into a trade without knowing when and where you are going to get out of it. Never let a loss on a trade get greater than 8%-10%, always take you loss and walk away – don’t loose more than you need to and don’t be afraid to take the loss. Remember you never can get hurt taking a profit. Never average down, but you can average up.
3 – You must have sufficient trading/investment capital. Use your own money, there’s no need to go into debt so that you can trade and/or invest. Margin can be used but only with restraints, never let the account wall below 45% equity. Unless you fully understand margins you should not use it.
4 – A full and complete understanding of the rules & regulations of the industry. If your going to play in the game be sure you know the rules of the game and always follow them.

Unless you are willing to study and follow the above you will never make it as a trader. To be successful as a trader it takes work and constant study of the markets and the products traded in those markets, there is no easy way.

Ken asks…

What newsletter or service had the best performance for picking stocks in 2008?

I know of one private service using options that got 80% and shadowing Vectorvest’s model portfolio got 87%, but I’d like to know if there are any with documented net % gains better

John answers:

I have discovered a great newsletter service that picks winning stocks.

You can sign up here.


Ruth asks…

What are the best stocks to pick if i’m trying to win the Virtual Stock Exchange game?

I have this competition going on and I really want to win but i need to get really good stocks that will double my money, or even triple it! If you guys can help i’d really appreciate it. Thanks 🙂

John answers:

This depends on the rules of the game.

Do you have to pick 1 stock only or do you have to pick 5 or more.
Can you do margin, options, ETFs, penny stocks etc. When does the game end?

We can give you names but if these stock are not within the given rules they are useless to you

Nancy asks…

What kind of stock would be a good investment for a 25 year old?

I am looking to invest in some stock while the market is so low- but I am not sure where to begin. I am looking for something that could be a long term investment. I am not looking to spend a lot of money, probably about $100-$200. I don’t want something that is very high risk, but something that has pretty good potential for high earning. I appreciate any advice anyone would be able to offer, either on companies to invest in, or where I can begin to do my own research.


John answers:

You need to consider budgeting a portion of your monthly income for investing. A $100-$200 lump sum investment is just that and won’t amount to much. Granted $100 invested now is worth a lot more than $100 invested ten years from now but it still won’t be much unless you can plan to say invest $100-$200 or more each and every month.

As to what to select, you’ll be better off with an index or total market fund to begin with. The costs of attempting to pick your own stocks is too high for any reasonable diversification and entails too much concentrated risks. Invest in the market as a whole instead though the funds.

Keep in mind that most funds have a minimum initial investment of $1,000 to $2,000. Of course once you’re in a fund, you can contribute far less than that each month. If you don’t have the $1,000 to $2,000 then you should consider CD’s and bonds which are available in small denominations, CD’s in particular as some CD’s allow for regular monthly contributions over the life of the CD. Accumulate enough via a CD to open a mutual fund and go from there. The important thing is to budget for investing and to stick to your budget.

James asks…

Can you pick stocks/make money on the stock market through trading solely on events?

As question states.
If not, what other methods would you reccommend for picking great stocks.

John answers:

Trading on news is one of the trickiest ways to trade:

To learn other methods, read these books:

How to make money in stock, by william o’neil
this book focuses mostly on fundamentals, but has some technical analysis as well.

Come into my trading room, by alexander elder
this book focuses on technical analysis, and talks a lot about trader psychology and safe money management.

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