Your Questions About How To Pick Stocks For Day Trading

Linda asks…

What should I do?

I am a brand new investor and I subscribed to a sock pick letter for small cap stock to try to learn on small cap investing and how to make profit. The buy price i got the stock was $.28 p/s and the target price was $.64. I put in a stop order to sell for the target price because I thought it would be easier to earn and not have to stand over my comp watching it all day. Did I make a wrong move? I mean, I think about it now and see how I could have been very foolish. What is the best way to handle this kind of situation? I am trying to get a handle of the market and feel for it and this is my first trade EVER. I really need some advice from experienced invertors. PLS HELP!

John answers:

As a fairly new investor in penny stocks and after reading some of the answers here are some thing to keep in mind.

1. Don’t listen to the people that say “Stay away from penny stocks”. It’s not for everyone that’s true and there are bad investments out there, but that doesn’t mean the entire segment is bad. It’s just more of a gamble than say buying Microsoft stock. To continue with the gambling comparison… The penny stock market is like Texas Hold ’em. It’s exciting, fast paced and if you go all in at the wrong time you could lose everything. Investing in mutual funds or the “safer stocks” is more like playing golf for a buck a hole. It’s nice and fun.

2. Start small and learn. It’s a different ball game than most other investing so you have to learn the tricks of the trade.

3. Do your homework. There is absolutely no substitute for doing your own research. If you don’t know what makes a good company or a company on the verge of growing, then you will have to get help… From a broker, etc.

4. Do what makes you feel comfortable. If you don’t have the time or patience to watch a stock as fluctuates during the day then putting in your a sell price is not a bad idea. You just have to watch because depending on the service you use and the amount of the investment, you could pay more in fees from that stop order than you made on your investment.

5. It’s possible that your investment will jump from the 28 cents to 64 cents on the same day, but in the few transactions I’ve done at similar buy prices, it hasn’t happened on mine. Most went a week or more before they rose to a level where I wanted to sell.

Helen asks…

Should I sell AEN to cut losses or hold out and see what happens?

To start off I just would like advice, I’m not saying that I’m gonna do everything that you say but I would just like to see how others would handle this problem. OK so I recently opened a Scottrade account with $1600 in it. I’m 17 and it’s under my dad’s name and it’s all the money I had in savings that’s why it isn’t a whole lot. Any way, I was looking under the cheaper stocks, in the $1-5 range. I stumbled across AEN when it was at $1.79 a couple of days ago. I paper traded that I bought 200 shares at $1.79. I waited a couple of days and saw that it had risen to $2.58 in a matter of days. I got excited thinking WOW I picked a winner. So I bought 200 shares of AEN at $2.38. The stock had been steadily rising over the past couple of months. I though, man it can only get better with this track record. So, as soon as I bought those shares it rose to about $2.40, and I’m seeing big dollar signs in my eyes, and then in the next two days it dropped to $1.51. I was thinking to myself what would spark the stock which had being doing really well the past couple of months to suddenly drop over a dollar? So I’m still holding my 200 shares which I bought at $2.38. I was thinking I would sell and cut losses but then I thought well it had been doing well so it might come back. I was just wondering what any of you other stock marketers would do in this situation?

On a side note to everyone who reads this and has a stock account, but RIG. That stock has been doing amazing the past year and has risen from $50 to about $85. My friend who knows a lot about of stocks told me to buy it then (when it was $50), too bad I didn’t have an account then. Anyway as far as I know it has only gone up. So ya…

OK back to my question. As I said I was just wondering whether to hold and wait for it to go up or sell and lose about $200. Just remember I only had $1600 to start out with!

Last side note here. I bought 200 shares of CYCC at $2.35. Just yesterday that is. It looked promising. Do you guys think that is a winner for longer term or should I blow the stocks as soon as it goes a little higher to make a quick profit?

Also, do you guys know any stocks that look promising but that are also in my price range? ($5 and below? Or maybe a little higher.)

Thanks to anyone who can help me! I just got started with stocks so you can probably tell that by now!
I appreciate the information. I can see how I messed up. So, how do you find out about the conference calls? This would greatly help me in the future. Thanks very much.

John answers:

Son, you are gambling not investing.

The financials of AEN are a complete disaster and you missed a very important piece of info in your research: an investor conference call on Thursday, April 1, 2010 to announce results.

In general, the market drives prices up in anticipation of good news. If you get good news (or “in line” news), the stock holds its price or moves up. If the announcement disappoints, the stock price drops. What happened yesterday…or last week…or over the last year is not a useful tool to determine what the price will be tomorrow if something changes. Stuff changes all the time.

Specifically, you are looking for stocks based upon the wrong criteria (price) and as a result you are working in some very muddy waters…some would say plan old mud or cr@p. Wall Street has a particular hierarchy of stocks. With very few exceptions, stocks selling over $15 a share are “investment grade” and are very well covered and researched. Stocks selling between $5 and $15 a share are “iffy” and get far less attention. Stock selling under $5 a share are generally considered cr@p. Your stock does not appear to be an exception to the rule. Stocks trading on the pink sheets are complete garbage (often stocks that fall below $5 “for a while” get sent to the pink sheets if they fail to perform to the exchanges liking).

It is also possible the price of this particular stock has been “manipulated” a little bit by owners who wanted to dump it in advance of the announcement yesterday. If so, that is probably a part of the reason why the price chart looked so good to you before you bought it — it was designed to just that.

To directly address your question, the rules of Wall Street are crystal clear:

Dump your loosers and let your winners ride.

Donna asks…

Good idea for a blog or no?

I started playing with this idea a few months ago. I let it die, I only made one post. I’m taking up interest again. (I do not agree with 2012 by the way. At all.)

Would you read this…? :

So I have a silly little obsession of thinking about the end of the world. It might be a bit unhealthy: picturing the death of many of my loved ones, the end of society as we know it, no more technology, etc. But it must be thought about. You can’t ignore the end, it’s inevitable. Eventually every society falls. You cannot keep a tower of cards standing forever. An outside force might bring it tumbling down. An internal, structural problem like one card placed incorrectly might spell the end of a high tower. The end will come. So why not ponder?

Would it be something political like wars, caused by our own faults?
Or is our end a force out of our control?
In each scenario how would we pick up the pieces?
Or would we crumble after having everything that was known taken away?

Our end will come. Collectively as a society. The walls that are around you will fall. The technology that is allowing you to read this will be lost. The world will be a different place. When that happens if there are any survivors of humanity they can chose to fight for themselves or unite to pick up the pieces. If we start thinking about the end now we can think about what is really necessary. It makes you think how attached you are to the conveniences of modern day life. The Starbucks down the road in ruins would mean no more Double Shot Mocha, no cell phone towers would mean no more texting, less people on the earth might mean less goverment control so there would be anarchy.

But the end of the world doesn’t have to be depressing. You can think of it as a new beginning. What if you didn’t have to be burdened by things like the stock markets, the threat of your life being plastered all over the internet, and children being influenced by the media. It’d be a clean slate for humanity as a whole to begin anew.

I like thinking of the chance to start fresh, to build society again with no ties to the past. This blog will explore what the end of society really means and how it can be a positive experience, though it isn’t easy. It will follow characters as they know the end is coming, scientists have announced the asteroid Apophis will hit Earth in 2029. The determination was made 10 years prior and announced two years later after much debate by world leaders. There was panic, mass suicide, people dealt with it in different ways. People began to build shelters, underneath the ground in preparation. Governments encouraged people to take steps to save themselves as it could not save everyone.

Governments fell apart though as people panicked. People began working on instincts. Countries collapsed. Anarchy become the norm.

Then Apophis hit.

The Line Up:
Alexander Cooper was voted president of the United States in 2020, one year after the discovery was made. He was chased out of office in 2026 when the United States collapsed because of anarchy. The White House was burned. Control was lost.

Amanda Pierce was 14 years old at the announcement in 2021. Her parents told her that the little life she had left was hers. She joined the new youth culture. She had a baby, Hope, in 2025, changing her views.

James and Laura Clark were celebrating their 20th year anniversary the day of the announcement. They have a 13, 10, and 5 year old. They moved the family away from their coastal community and to a community preparing for the impact.

Jack Nilson was raised in poverty, homeless at the announcement date. As anarchy began to become commonplace his attitude and practices were accepted. He knowledge lead to him becoming leader of a gang that started in L.A. and migrates around trading with other groups.

More characters might join in, this is just the current line up. More posts later.

John answers:

I’d love to read this! Sounds fascinating!

Betty asks…

I’ve to prepare a write-up about myself?

Im applying for an mba course which requires me to describe myself in some 200 words, addressing my personal qualities, strengths, weakness and activities that interest me and also what i think my parents etc think of me… I started writing but got lost as always I don’t have the right direction to proceed.

this is how i started

I would like share my life experiences and how those helped me understand myself. Being the eldest sibling, I’ve been mature and self reliant as far as i can remember, i used to take decisions about my studies, etc since early days in school and i used to get good results with my strategy of focusing on the basics.
Graduating away from my home i’ve learnt to adjust and adapt. I used my new found freedom to explore new places and thus travelled a lot with my friends, which helped me understand and interact with new people. I picked up organising skills while organising those trips and other events in my college like our branch’s fest, intra college quiz, etc.
I’ve been working with cts for the last 29 months as a software consultant. While doing this i’ve realised that i’m very keen learner, as i’m always interested to learn new technologies and gather information about the business. There have been situations where i’ve worked under pressure, continuously to meet deadlines. I’ve realised that how team work is important to succeed professionally, how i need to be flexible to accommodate others and also how to rely on others. This has helped me understand my shortcomings and overcome them as i’ve realised that i loose my patience sometimes when others are calm or sometimes when i’ve failed to realise my mistakes when others pointed them. My ability to earn has also made me more sensible in making decisions for myself and utilise my resources to best possible means. I’ve developed new hobbies and developed interest in tennis, cricket, stocks, etc.

And these are the qualities i could find in my soul searching:

+ves

1. I’m an inquisitive and very keen learner as i’m always on a lookout for something more. I like to share that knowledge with other people and love to get into conversations or debates with my friends.
2. I’ve good analytical skills
3. i always stress on the basics
4. I don’t hesitate to ask questions and doubts.
5. I can work under pressure.
6. I’m helping and don’t mind going out of my way sometimes to help people.
7. I’m broad minded and open to unconventional ways.
8. I’m a good listener
9. People trust me and and my parents believe that I’m capable of doing anything
10. I’m honest and trustworthy
11. I’m fun loving and adventurous
12. I’m a perfectionist
13. I’m social and i like to work in team

-ves:
1. I take people for granted and don’t care about there feelings
2. I’m not punctual
3. I don’t take criticism positively
4. I cant concentrate on one thing for very long and thus deviate from my goal
5. I’m not very self confident
6. I like to show off
7. Jack of all trades master of few
8. I don’t trust people and I can be manipulative at times
9. I’m introvert and shy

The problem here is how to present myself as a worthy candidate for an mba course by earning brownie points from what i write and proving to have the potential and ability to become a good manager

John answers:

” 5. I’m not very self confident
6. I like to show off ”

these to points stuck out at me i cant understand how you cant be confident but you like to show off . Read over your full question and search the internet for the answers

Mandy asks…

For the option nerd …writing options , what are the pragmatic risks?

I just finished talking to a trader who says he has been very successful managing options for clients , where he sits with each client and discusses potential picks and will tell me what stock to play – in terms of option. The only difference is that – he beleives only in WRITING PUTS AND CALLS not in buying or selling them. The assumption is that 80 % times options expire worthless so rather than be on the buying side of these, its better to sit across the table and sell them ( be it calls or puts ) . I told him – that is selling NAKED CALLS AND PUTS ..isn’t it ..?
Yes ..it is ….
Ok , then do I not expose myself to unlimited risk and there are many places that put red underlines on naked calls and puts.
He explained that we monitor your a/c and if find your going to loose your position we square it up immediately and get you out. So we have’nt seen anyone in a bad mess.
Now theortically you ARE AT UNLIMITED RISK with a naked Call/Put BUT PRACTIALLY SPEAKING ..HOW IS THAT PROSPECT.
Lets say you sold a Call of Strike $50 at say $60 and market is at $20. Now contrary to your assumption that market actually went UP in just 2 days and the call became “In the money” . What does that mean ? Does that mean the broker immediately deducts the actual cost of the options from you AC or you still have time and you can buy a Call that is in the money of the same strike and cover your position. If that is so – where is the “unlimited risk” thing that people where warning you about where you can loose ur shirt ?
Can someone PL EXPLAIN THIS PART . AND IN REALITY WHAT IS THE RISK OF LOOSING YOUR SHIRTS WITH NAKED WRITING ?
ALSO IF THE MARGIN REQUIREMENTS FOR WRITING OPTIONS IS JUST SAY $3000. AND THIS SITUATION OCCURS THE BROKER AT THE MOST CAN EAT AWAY MY $3000 BUT HE CANNOT CHASE MY BANK ACCOUNT AND ASK FOR MORE ..CAN HE ?

The 2nd Question I have is – what incentive could this broker have ( other than steep commissions of course, for managed trades ) . Could his strong like for writing options be BASED ON THE FACT, THAT WRITING THESE INSTRUMENTS MEANS PUTTING SOMETHING NEW INTO THE POOL Vs buying OR SELLING THEM. So he is actually changing supply / demand in such a manner that he controls the price of these.
Thanks
Arnie

John answers:

First of all, some brokers require you to have as much as $100,000 on deposit (could be held in equities) to write puts and calls because of the risk. Some brokers may require substantially lower amounts on deposit but then you could be forced into margin calls on your equities if a written call goes bad.

Second if you write a call and the stock goes up (your written call doesn’t have to be in the money), it will cost you more to repurchase the call to limit your liability than the original written call. If you wait until it is in the money, the cost could be 3 or 4 times the original cost of the written call. If the stock is skyrocketing, the cost to repurchase the call may be enormous even before it gets in the money.

Yes you can protect yourself from unlimited losses but the losses can still be very significant if you purchase the call when it is in the money especially if there is plenty of time left on the call.

Repurchasing the call may not be the best solution but just purchasing the stock at it current price may be a better solution to protect yourself.

There probably isn’t any ulterior motive by the broker other than to make large profits.

Powered by Yahoo! Answers

This entry was posted in Uncategorized. Bookmark the permalink.