Paper gains and Stocks

[Silverfondler]

I know most people apart of RC are PM stackers. Which i think is great - I myself have recently started to stack metals. However, I am also involved in the markets and before you sigh - I understand it is manipulated, it is over-valued as whole (the markets that is), it can come tumbling down at any moment. With that in mind...

I am interested in what you guys are into in regards to the market? What positions and companies are you involved with and why? Always looking for more angles to manipulate my own portfolio. Both for the short-term and long-term.

The way i see it is, if you are thirsty you go to the water fountain - if you want money it's in the markets. Get off the bench and get into the game!

E

[johnbrickner]

I have pared back from my hay-days of market ownership. I once had a (as described by an investment counselor) mini-mutual fund of individual, historically good dividend paying stocks. Now I am split between mining stocks and an investment counselor's mutual fund that invests in a spectrum of other mutual funds. One is my "if the world goes to shat" investment and the other is in case I'm wrong. And that's about it.

[Recyclersteve]

I know it has been over three years since your post, but I'm curious if you are still trading. I have lots of experience trading and I think it is more important to have a system for managing your trades than picking good stocks. There are plenty of times where stocks which are acting great have 15-20% pullbacks before turning around and going higher. If you buy a stock once and say that you will cut your losses if your stock goes down 7-8% (as William O'Neil of Investors Business Daily suggests), you will have a lot of 7-8% losses. Someone who plans to buy the same stock perhaps 4-5 times (as Jim Cramer of CNBC suggests and as many I've talked to over the years have done) has a big advantage over the person who buys a stock only once. You will get different opinions on this, but think about flipping a coin. You've got a roughly 50/50 chance that you will get the first coin flip right. The chance of being wrong five times in a row is roughly 3%.

In my prior job as a stock broker I spoke with over 100,000 people in almost 20 years. This included all types of investors and traders, some with well over $100 million to trade or invest with. I heard about virtually every type of system you can imagine. Those who think you can take a one week course and become a proficient day trader or who think that some kind of red light/green light trading system is the tool they need will eventually be humbled.

There is a book called Outliers which says that it takes 10,000 hours to become an expert at something. I remember that trading finally started to click for me around 2004-2005. That's the point where I had about 10,000 hours of work invested. To put it in perspective, someone who works 40 hours a week and get two weeks of vacation a year will work about 2,000 hours in a year. Five years of full-time work gets you to the 10,000 hour threshold. The vast majority of people will never do this and will be glad to pay others for a shortcut- as if there is one.

I can't tell you how many times someone looked at a chart that was technically a beautiful sight, but my instincts told me to avoid the stock and shortly thereafter it got pounded. I calculated that I've looked at over a MILLION charts in my life and with that much practice you develop instincts.

If you read the Market Wizards series of books by Jack D. Schwager (Market Wizards, New Market Wizards, Stock Market Wizards, etc.), you will find that top traders frequently remark that they have new traders sit with them (sometimes for a few weeks) and take copious notes on EVERYTHING. Still the novices can't duplicate the success of the master when they begin to trade with their own personal money.

Nonetheless, I thoroughly enjoy trading and it helps pay the bills. If anyone asks for my favorite stock, they need to re-read this post.

[Silverfondler]

Its been a while since checking my posts and my profile for a while. I was recently reminded. To anwser your question. Yes I'm still active within the markets. Actually, I'm more involved and just as interested than when I started. For me it's more about managing risk (my losses) than it is about my big wins or how often i'm turning a profitable trade.

I would love to discuss trading and the markets further!

[Recyclersteve]

Its been a while since checking my posts and my profile for a while. I was recently reminded. To anwser your question. Yes I'm still active within the markets. Actually, I'm more involved and just as interested than when I started. For me it's more about managing risk (my losses) than it is about my big wins or how often i'm turning a profitable trade.

I would love to discuss trading and the markets further!

One thing I would be doing now if I wasn't already comfortable with it is to learn about selling short. The markets will go down sharply at some point. If you are like a deer in the headlights when that happens, then you were not prepared and you have nobody to blame but yourself. Think about stocks like Amazon (AMZN) and Netflix (NFLX), both sporting P/E ratios of OVER 150. A normal P/E is more like 15-16 or so. These are both high growth popular stocks, so I wouldn't short either one right now, but there will be a point where both will be screaming shorts.

Think about Chipotle (CMG), which used to have a high P/E. It went from $740+ to $270+ over roughly two years. Keep in mind that there are always stocks that will go down and eventually go bankrupt even in a bull market. One that is almost there, but not quite is Sears (SHLD). The problem with shorting Sears (I did so last year) was that it was Hard-To-Borrow, meaning that you had to pay a fee to get shares to short. In the case of SHLD the fee was VERY HIGH. In the case of AMZN or NFLX (at least for the time being) you shouldn't have an issue like that. Don't get me wrong- I'm not saying you should short either AMZN or NFLX yet, but I'd sure watch them closely for when the opportunity arises. Something that could change things (in a bad way) for either stock would be for it to drop below the 200 day moving average with huge volume and be down sharply that day. Then, the following day, for the stock to continue to go even lower. That would be interesting to watch.

Even if that were to happen, I'd be prepared to short both stocks more than just once. See my posting earlier in this thread for more info. Good luck.

[Recyclersteve]

Let me add something else. If you search my posts going back to June, 2017 (my retirement date), you will see plenty of detailed comments about the stock market. I don't want to waste a lot of time rehashing something I've gone into great depth on in the past.

[Silverfondler]

Hey thanks for the quick reply. So I mainly trade the option and i utlize both long and short options. Depending on the situation. As of now I really just focus on MSFT and AMD. Having aid that I obvisojly observe want other tickets and opportunities but I am currently most intimate with those two companies.

[Recyclersteve]

AMD just had a meaningful breakout, which is good for those who are long. On the other hand, the stock has been heavily shorted, which means that it can really move sharply even sometimes when there is no news. If you are fully prepared with this when trading options, then you should enjoy it. There are probably a lot of short-term traders giving AMD more attention now than at any time in a long time. AMD was my first ever AFTER HOURS trade in the late 1990's and I've traded it a number of times over the years. Don't currently have a position, but am always watching and waiting for the right opportunity.

MSFT might feel like watching paint dry compared to AMD, but it is acting fine.

[Silverfondler]

Yes, AMD has enjoyed a sharp increase over the past week or so -including a short-squeeze which made the gains that much sweeter. I think the move was a little much to fast and it is unsustainable, it is enjoying increased volume from retail investors that are jumping in. The last two days, soon to be three days have been painful to watch as the price movement is stuck in a channel effectively wrecking options and hardly giving scalpers a chance to make plays. Nevertheless, it is an exciting time within AMD right now with all the action it is receiving.

Great comparison with MSFT - it quite literally is a yawn fest when comparing the two of them. But, MSFT is great for being in a rhythm and great for learning patterns and situational analysis.

What kind of trading were you involved in when you were active? Did you work for yourself or an investment firm?

Recently, I've been reading up on scalping and what that world is all about. I wouldn't say that's my next step. i'm more intrigued by the idea of what it all entails.