Friday, May 28, 2004
So here's the deal. I sold my Southwest stock. It's been down for a third day in a row. I just had a bad feeling about that. It dropped a whole 15 cents a share today.
I bought a hundred shares at 14.98 last Friday. Today, I sold those hundred shares at 15.48. That's a gain of fifty bucks. Now with my twenty bucks in fees, I made thirty bucks. That may not seem like a lot, but that works out to about a 2 percent return. Not bad for a first try at technical analysis. (It doesn't seem stellar, but it's only been a week.)
It's got to be better than the gambling I've been doing. I've just got to remember the number one rule. Use stops.
I was talking to a guy at work today. I think I am going to tell him about technical analysis and let him consider it for himself. I just asked him for three unrelated stocks. I've printed them off and plan to show him the charts. He actually picked three good looking stocks, but they are too expensive for me. At least they are near to good looking, but close only counts in horse shoes and hand grenades.
He told me about when he bout K-Mart stock he was planning on retiring on it. I told him that I had bought some as well. I only bought a hundred shares and the next trading day they declared bankruptcy. (Just after a three day weekend.) The price went from the 1.50 I bought it at to 75 cents in one swoop. I was seriously depressed.
He told me that he bought a thousand shares at sixty cents a piece. Now of course, it didn't stay at sixty cents. It went back up to $1.70 a share. He was planning on retiring on those shares. The thing is that I just wanted to double my money.
I sold out at about 90 cents. He never did. Today, he has a thousand pieces of toilet paper. This is why stops are so important. When you buy a stock you say to yourself, "How much am I willing to lose on this deal?"
If you buy a stock at ten dollars and decide you are only willing to lose ten percent, you set a stop loss order at 9 dollars. Essentially, you tell your broker that if it hits nine dollars, you want out. You may actually get to sell it for 8.50, but at least you are out.
It's human nature to want to be right, but remember, this is money people. Sometimes it's okay to be wrong. Especially when being right is costing you lots of money. And if you had been holding that stock for a month and it had lost ten percent of it's value, then it's probably rocketing towards bankruptcy. After all, if it loses ten percent every month for ten months?
Rule number two of trading is to remove emotions. It's hard not to sit there watch, but really, you've got to have method in place and watch it logically. You can really get addicted to stock trading. Remember there are guys that commit suicide over this stuff. You've got to remove your emotions and tear yourself away. It's worse than alcoholism for some.
But you do have to look at it every day. About an hour or two. You have to sit down with you crayons and construction paper and doodle all over. Draw a squiggly line here. Draw a straight line there. Draw an arrow somewhere else. There are websites that do this stuff for you now, but you still have to tell them what you want.
Buy Technical Analysis for Dummies. If you don't trust it you can go to Fool Dot Com, and set up a fictitious portfolio. Then you can see how well it works. Of course, I've got a broker. I kissed that money goodbye a long time ago. (That's why I don't freak out when I lose some.) If I do well then that's okay.
Until tomorrow, remember. This is not a recommendation of any stock, book, or trading method. You should consult your friends, family, and financial advisor before making any decisions. Take that SEC!
I bought a hundred shares at 14.98 last Friday. Today, I sold those hundred shares at 15.48. That's a gain of fifty bucks. Now with my twenty bucks in fees, I made thirty bucks. That may not seem like a lot, but that works out to about a 2 percent return. Not bad for a first try at technical analysis. (It doesn't seem stellar, but it's only been a week.)
It's got to be better than the gambling I've been doing. I've just got to remember the number one rule. Use stops.
I was talking to a guy at work today. I think I am going to tell him about technical analysis and let him consider it for himself. I just asked him for three unrelated stocks. I've printed them off and plan to show him the charts. He actually picked three good looking stocks, but they are too expensive for me. At least they are near to good looking, but close only counts in horse shoes and hand grenades.
He told me about when he bout K-Mart stock he was planning on retiring on it. I told him that I had bought some as well. I only bought a hundred shares and the next trading day they declared bankruptcy. (Just after a three day weekend.) The price went from the 1.50 I bought it at to 75 cents in one swoop. I was seriously depressed.
He told me that he bought a thousand shares at sixty cents a piece. Now of course, it didn't stay at sixty cents. It went back up to $1.70 a share. He was planning on retiring on those shares. The thing is that I just wanted to double my money.
I sold out at about 90 cents. He never did. Today, he has a thousand pieces of toilet paper. This is why stops are so important. When you buy a stock you say to yourself, "How much am I willing to lose on this deal?"
If you buy a stock at ten dollars and decide you are only willing to lose ten percent, you set a stop loss order at 9 dollars. Essentially, you tell your broker that if it hits nine dollars, you want out. You may actually get to sell it for 8.50, but at least you are out.
It's human nature to want to be right, but remember, this is money people. Sometimes it's okay to be wrong. Especially when being right is costing you lots of money. And if you had been holding that stock for a month and it had lost ten percent of it's value, then it's probably rocketing towards bankruptcy. After all, if it loses ten percent every month for ten months?
Rule number two of trading is to remove emotions. It's hard not to sit there watch, but really, you've got to have method in place and watch it logically. You can really get addicted to stock trading. Remember there are guys that commit suicide over this stuff. You've got to remove your emotions and tear yourself away. It's worse than alcoholism for some.
But you do have to look at it every day. About an hour or two. You have to sit down with you crayons and construction paper and doodle all over. Draw a squiggly line here. Draw a straight line there. Draw an arrow somewhere else. There are websites that do this stuff for you now, but you still have to tell them what you want.
Buy Technical Analysis for Dummies. If you don't trust it you can go to Fool Dot Com, and set up a fictitious portfolio. Then you can see how well it works. Of course, I've got a broker. I kissed that money goodbye a long time ago. (That's why I don't freak out when I lose some.) If I do well then that's okay.
Until tomorrow, remember. This is not a recommendation of any stock, book, or trading method. You should consult your friends, family, and financial advisor before making any decisions. Take that SEC!
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