It has been an eventful week with a hard costly lesson learnt.(See previous post.)

I was tripped up by my old enemies, Fear and Greed. Which is what you get for being complacent and letting your guard down.

Rene Rivkin once qouted, ” Unless human behaviour changes (and it won’t) fear, greed and folly will always drive the market.”

In boom times too many investors get greedy, particularly if they have made a 30 - 50% profit on a new float.( IPO) “Initial Public Offer.”or any other stock. And after that a mere 15% profit is just not enough.

Whatever you do don’t fall into this trap. Because hanging on to get the biggest profit you can ,on every trade will mean that you will miss out on a lot of substantial smaller profits. Plus by hanging on too long also exposes you to greater risks of getting caught in a price downturn.

In any market a 15% annual return should be considered as very rewarding.

Doesn’t matter how good you are at picking stocks, you will very rarely pick the top or bottom price of a share and if you do it is plain dumb luck.

While we are on the subject of “Picking” here are a few ideas that I employ in finding my next “profitable Share.”

Firstly this depends on the market you select and your trading style. Before returning a single cent of profit you must spend time in some form of research / analysis ( Either Fundamental or Technical ) to find your future stocks.

The objective is for you to find the best stock opportunities as quickly as possible so you can assess them and take action before trading starts for the day.

I do this on the weekend using data from last week. And it is more relaxing as well, as there is no pressure on.

On average I spend about 2 hours preparing for the week ahead. My watchlist is forever changing as poor performing stosks are dropped and new ones put on.

Here are a few ideas. Pick what suits you best as you will trade differently from the way I do.

1.Pick the section you wish to trade in. i.e. mining.

2.Pick the “Best” performers today compared to yesterday.

3.Pick the best performers over the last 3-5 days and over the last 2-3 weeks as well.

4.Any stock making new “Highs @ Lows”

5.Once you have chosen the stock you fancy look up the latest share price and write it down.

6.See what the market capitalisation is. (How many shares they have issued)

7.Who are the major shareholders? Any names you recognise?

8.Look at any recent company announcements in the last 2-3 months or so. Taking particular notice of any CEO or Directors Report and while you are at check the auditor’s report and the company’s financial report.

Be aware of “Cash Burn” that is when companies are spending money faster than they are making it. When the money runs out they either raise it by more share issues or by going into more debt.

9.Are the Directors buying or selling their shares? Obviously if they are selling I would look twice before investing into that stock.

10.Have you seen or read anything about the company in the TV News, newspaper or Financial magazines? Was it good or bad?

11.If you are into Technical analysis look up the past charts (You will find excellent charting aides i.e. “Candlestick Charting” plus others in the DOWNLOAD section.)

12.Work out your entry price according to your budget.

13.Work out you stop loss exit price (10% is about average) in case the stock does a reverse in price.

14.Work out the profit you want out of the trade.( remember don’t be greedy) I personally go for around 15 -20% profit. But be variable,because if the stock goes haywire and they do. I would rather have 5% profit than none at all.

15.Work out your exit price

16. Have a trading plan. And above all stick to it.

Did you realise that traders who do their own analysis are in the minority!

Apart from the big companies who employ their own analysts, the common every day investor does not bother with analysis at all.

They either follow Financial Magazines, or pay to get the information from the numerous advisors that thrive of lazy investors who would rather pay “through the nose” than look out for stocks themselves.

And when things go wrong and they lose money, (which will happen) They then change advisors.It is called ” Guru Shopping.”

If you must have a “Guru” try “Hazelhurst in the “Bulletin” His speculative picks on average are fairly good and it will cost you the price of a beer ,which is cheaper in the long run.

Incidentally,another funny thing that I have noticed is that there are always more “Buys’” than “Sells” from the advisors.

Personally I prefer to do my own research as I am tight as a fish’s a##e, (And that’s watertight) when it comes to parting with any money.

And that is one of the “Major” reasons that this site exists is to save YOU money and everything you find on it is for “FREE.”


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