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In the past, I only trade a handful of well-known stocks such as GOOG, AAPL, F, etc., what do you think?

  • I think you are a male from IT background :-)
  • A financial background female probably will focus on a list of BAC, TIF, COH, etc. :-)
  • This is exactly most (> 99%) amatuer investors do :-)
  • If you only choose stocks from such a small pool, how many times in a year you can find good chance (entry and exit) to make a profit?
  • These so-called "well-known" stocks are just companies whose products you may know in your personal daily life, especially consumer products. But there are many good companies with great products. You don't know them because you have never used their products, but that doesn't mean such good companies doesn't exist. Actually they greatly reward those investors who know them, let me show you some exmaples:
    • CELG, a leading bio-tech company, whose 2013 year-to-date price rised from $80 to $146.
    • VMED, Virgin Media Inc. This stock is so boring, that goes up slowly almost every week from ~$25 (June, 2012) to ~50 (June, 2013) before it's acquired by FOXA.
  • That's why I built my system to scan all the ~7K US stocks to find good ones.
  • You really need to have an open-mind to win big :-)

How does your system work?

  • The system scans all ~7K stocks in real-time, and select the best momentum stocks with good FA, and TA indicators of the day.
  • The system will do its job to select the best moving stocks, you need to do your job by strictly adhere to disciplines.

Why short-term trading?

  • Because of the "do NOT bet any ER rule" :-) which means at least you should clear your position every 3 months. (OK, you can buy options in the oppsite direction to protect your stock position, BUT why you want to BET in the first place?)
  • Because no-one can predict the stock market, in a year's time anything can happen. E.g. The great company AAPL: in 2012 moved from $4xx up to $7xx, then down to $5xx again.
  • One should always take appropriate actions according to the market condition change, to adjust his stock holdings.
  • Because in the internet age, Wall Street and many institutions use computers to do high-frequency-trading.

Do NOT trade options

  • The only exception: do NOT use margin, you can buy long-term deep-in-the-money DITM calls/puts, better with beta > 0.99 and theta < 0.01.
  • Credit Spread: avoid, it has high risk/reward ratio (any risk is risk, even the big index such as Dow can drop 300 point in one day)

How about Fundamental analysis (FA), do I need to read all the earning reports?

  • You are encouraged to do so, if you really have time :-)
  • But there is a thing in Computer Science, which is called "data-mining". Why don't we get the collected wisdom from the internet on this relatively objective indicator?

Stop orders

It is encouraged to use stop orders:
  • When enter a position: setup a buy stop order at (or above) the breakout price.
  • When exit a position: setup a (trailing) sell stop order to protect your profit or loss.
  • Another best thing about stop order is that you can setup the order at market after-hours. So even if you are busy during the day, you are protected from loss, as well as be able to catch the leaving bus :-)