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. . Remember Animatronics? How about Claymation? Ah, those were the days. . . Wonky (adj.): askew, awry, unsteady, off-kilter. Like gadgets or stock markets. Techwonk (me): someone who likes wonky stuff. A nerd!!!! . . disclosure: some posts may include input from other, uncredited sources . We... More
  • A Word Of Advice For Beginners

    SA members who know me know that I'm definitely opinionated. I like to talk about stocks, and I don't mind a good argument now and then. It's good mental exercise to have your opinions challenged.

    But I don't get into posting a lot of buy-and-sell signals regarding specific stocks, for three reasons.

    First, the market often proves me wrong -- even when the fundamentals say I'm right. Stocks trade up and down for lots of reasons besides the intrinsic worth of companies.

    Second, companies often prove me wrong. Competitive climates can change as fast as the weather. Today's good long trade may be tomorrow's best short.

    So should you throw away your calculator and only trade momentum? I think not. I don't ignore momentum -- it has its place in analysis -- but I don't rely on it exclusively either.

    With that said, I have to add that some stocks are more momentum-driven than others.

    I like to say that there are trader's stocks and investor's stocks, just as there are traders and investors. The beginner often has trouble telling one kind of stock from another. This is especially true at market extremes, when all stocks seem to be trending together, either up or down.

    The best comment I ever heard on this subject was from an options trader who said, "if you're dating a girl with allergies, please don't send flowers." If your stock is highly volatile, whose problem is it if you go long on momentum and then the price falls back? Yours.

    Today more information than ever is available to beginners, even if transparency is not yet 100%. My hope for beginners is that they will use many sources of information in their decision making.

    Most stocks that have been exchange listed for a number of years have a track record. Get to know the company -- but also get to know the stock. How does it trade? What are the investment risks -- but also, what are the trading risks?

    Whether you hope to invest successfully or trade successfully, you need to be able to think like both an investor and a trader. If you can do this, the market will surprise you less often.

    The third reason I don't often give trading tips is that I'm here to learn. I hope we can learn together. Let me know what has worked for you and how you learned from it.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Apr 10 5:39 PM | Link | Comment!
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