RunawayTrader

Adventure Travel Meets Online Stock Trading

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Is It Too Late to Buy BIDU?

July 4th, 2010 · Runaway Trading, Stock Trading

Baidu Has Been Languishing Lately — and That Could be a Sure Sign a Comeback is Due

BIDU is a stock I play a lot. The reason is simple: high beta; lots of volatility. Sure, much of that volatility has been trending down in recent days, but this stock always has a way of bouncing back at just the point when others traders (those folks we call “weak hands”) are tempted to shed some pain by selling off.

It’s my hope and my prediction that the bounceback will happen this week. First, some history.

BIDU has been sailing along famously since it went public in August 2005. The first-day trading range (I was there) was astonishing. The low for the day was $66. The high was $151.21, and it closed at $122.54. Now that’s volatility.

Ever since that day, BIDU has been one, thrilling ride. Even up to May 12, 2010, when it declared a 10:1 stock split as the last traded at a phenomenal $714.17.

The road has been a bit bumpier in recent months. It’s hit a high of about $83 but it’s taken a beating in the past month and closed Friday at $67 and change.

A portion of that sell-off was caused by the on-again, off-again spat that Google is having with the Chinese government, Baidu’s homeland.

Google announced in January that it might leave China because of censorship concerns and a hacking episode that it said originated in the country. But it’s been bouncing around more recently as Google continually shifts its position.

In one misguided attempt, Google closed its China-based search engine in March and began routing users to its unfiltered site in Hong Kong. Google was hoping that shift might maintain its technological toehold in one of the Internet’s most important markets while sticking to its position as guardian of free-speech.

Did it work? I guess not.

In an attempt to make amends with China, Google last week stopped automatically redirecting traffic from mainland China to its Hong Kong site after the government warned the maneuver could result in the loss of the company’s Internet license in the country.

That issue is an important one for BIDU and with each Google maneuver, BIDU shares react accordingly. Analysts said Baidu could win as much as half of Google China’s search revenue if Google loses it license. That would add as much as $330 million annually to Baidu’s top line, representing a more than 50 percent increase on 2009 revenue of 4.45 billion yuan ($654.8 million).

Earnings May Provide Some Answers

My guess is that by the time BIDU announces earnings, the Google question will be resolved, one way or another. Google will NOT throw away the China market; it’s just too big to be ignored, principles of free speech notwithstanding.

Meantime, I also expect that BIDU will blow away the numbers from July 22 when it reports earnings after the close. EarningsWhispers.com says 91% of visitors think there’s an upside surprise in store.

Meantime, I’m watching the Google charade, the Beijing response (or retaliation, if you’re taking the hard line), and waiting share price to rise 5-10 points between now and d-day on the 22nd.

Place your bets. The wheel is spinning.

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BIDU: How Great —How Awful

May 16th, 2010 · Runaway Trading, Stock Trading

Smart Money Will Buy and Hold BIDU

“It was the best of times. It was the worst of times.” These lines from Charles Dickens’ Tale of Two Cities, came to my mind today. It was probably just a freak accident that demonstrates the demented condition of my aging my neural pathways. It makes me fearful my synaptic gaps have long since given up firing the proper cylinders.

At any rate, the lines came to mind when I was reviewed a blog I wrote just about a year ago when I had runaway to Fallingwater, the house that Frank Lloyd Wright built in the Laurel Highlands of the Allegheny Mountains.

I remarked in that blog, as I usually do during my getaways, how my trades pay for my travels. In this instance I was holding Baidu (BIDU), the so-called Chinese Google, and was looking for a gap-up the next day, which I not only got, but which paid for my entire trip. (P.S.That’s the way runaway trading is supposed to work.)

But two things really surprised me: Here it’s a year later and I bought BIDU just this past Friday looking for the same gap-up Monday morning. Some things never change. But the second surprise was even more powerful: I had purchased shares of BIDU at $249.

That, I guess, is the best of times, the worst of times. Why? Because BIDU hit a triple-bagger during the intervening year, topping out at $716+ before it split 10:1 last week. And that’s terrific if you were holding BIDU for 52-weeks. But it’s bad if, like me, you were playing a year-long game of hide-and-go-buy this past year. Had a purchased – and held – a measly 100 shares I would have been 50-Gs richer now.

Ah, but that’s hindsight.

Which brings me to today’s advice. I think BIDU is going to keep on going and I (and you) would be well to Buffetize this stock—meaning, buy and hold. I think BIDU will double again. Maybe more. With Google pretty much out of the market, they’ve got practically no competition and this is a stock that likes to roar louder than the indexes:  Beta: 1.93

I’m predicting you’ll clean up with this trade. And if I’m wrong, write me. I’ll be somewhere between Timbuktu, the Appalachian Trail, and Nepalese trail to Mt. Everest basecamp. And the meantime, here’s a little more Dickens to cheer you up and wonder, “what in the hell is this guy talking about?” This guy must be a day trader to go through so much angst.

“It was the best of times, it was the worst of times; it ws the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; it was the season of Light, it was the season of Darkness; it was the spring of hope, it was the winter of despair; we had everything before us, we had nothing before us; we were all going directly to Heaven, we were all going the other way.”

Charlie the Runaway Trader

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Stand Back, Everybody. The Runaway Trader is Trying his “Can’t Miss” Million Dollar Stock Trading System Again!

May 13th, 2010 · Uncategorized

Faithful readers of my blog will remember that from time to time, I write about my famous, still unproven stock trading system that promises to turn me into a jillionaire in no time flat.

I last wrote about this powerful strategy a couple of years ago—about the time the market started to turn into crap. While I never revealed the full details of my surefire system, it was not for lack of charity to my fellow traders. My only excuse was I didn’t want to deliver some half-baked notion festooned with slick promises on which it could not deliver.

When I first mentioned this system, I was mostly “paper trading” to test its veracity across one, single stock. Voila! It managed to deliver something like 38 straight winning trades over as many trading days. I fully confessed at the time that such results were simply too good to be true. And more, I stated that I had, in all probability, bumped into a “system” that worked wonderfully when it worked, but bombed when it did not.

How prophetic was that prescient observation

I went on to successfully use the system for a few weeks, but then the market turned sour and so did my “surefire” strategy. To put it mildly, I lost my ass before I finally figured out that I had only a piece of a system, that’s all. An important piece, but not the whole megillah.

I was merely day trading (although quite skillfully) in accordance with the prevailing favorable market winds at my backside, the soothing zephyrs that make every trader a genius. But when the winds reversed and my strategy did not, my precious trading capital began to irretrievably flush its way down the Wall Street toilet.  After a while, I abandoned the effort. I think I wrote about that, as well.

But here’s the important point: had the winds of chance not changed (or if only I had caught the breeze a little earlier), I would have earned a million dollars in little more than one month. No foolin’.

Betting the Trend Again

The reason I mention this today is that I revisited the trading strategy this past week— and again, the paper (you know, the kind that don’t mean diddly-squat) results were truly phenomenal: 21 successful trade across 22 days and I doubled my monopoly money.

So, starting today, I’m putting my little plan back on the front burner where it can turn my hard-earned cash into piles of cash or cinders of dead presidents. I’ve already made my first trade and results of which will arrive tomorrow.

In any event, I’ll keep you informed. And if it seems like I’ve really got something, I’ll be glad to share it.

Meantime, is it Time to Sell Gold Again?

It’s a secret to nobody that gold is hitting all-time new highs and the bullion houses are at feverish pitch trying to get you to buy some. I’m thinking just the opposite. I bought gold Krugerrands back in fall 2008, at $771. I can sell them today at $1,246 each. That’s an increase of better than 60%. That should be my cue to take my profits and run.

Yes I know the economy is in a pickle globally things seem to be getting steadily worse. When it hits $1300 I’m outta here. I’ll buy it back at, say, $1000. Meantime, I’m just about set to take off again. I’ve got a lot a travelin’ to do.

Charlie, the Runaway Trader

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If You Think I’m Going To Write About This Market Meltdown—You’re Wrong

May 7th, 2010 · Runaway Trading, Stock Trading

I mean, what’s to say? The Dow is down hundreds of points, the market is crashing, and I certainly gave back everything I earned from DNDN—and a lot more.

So, easy come, easy go. Now where did I put that noose . . .

Instead, I’m writing off-topic today about a nasty little phenomena that I’m beginning to see everywhere on the net. And you’re likely to see more of it in the future.

I’m talking about cost-per-click (or its brother, cost-per-action) remarketing: a system that reaches out to surfers who have previously visited a website, and delivers advertising to them as they surf elsewhere on the web.

A Recent Example

Let’s suppose you visit the Web site of APMEX, the American Precious Metals Exchange, as I often do. I’ve bought plenty of merchandise from this company as a hedge against days just like we’re experiencing this week in the market. My experience with this company has been just great.

But, lately I’ve been noticing that APMEX banners have been appearing on all sorts of other sites that I visit. What’s going on here?

Well, here’s the scoop. When I visited the APMEX site, those dirty little cowards dropped a cookie onto my hard-drive and that tiny script generates those ads on other sites that work with these remarketers, companies that specialize in working with advertisers. They’re the middle-men who help them place those cookies on your site and then blast you with the advertiser’s messages.

I first noticed this awful business when I visited a dating site, PlentyofFish.com. The next day I started seeing their banners on news and other sites that I frequent. Since I knew that was an impossible coincidence, I removed all my cookies and voila!, the banners disappeared.

But, I opened an account with Ally Bank, and now I’m seeing their ads everywhere I surf. I do business with PR Web (a news release dissemination outfit) and now my computing surfing experience is awash with their ads.

I hate it.

I know advertisers think they’re using a “lowest hanging fruit” marketing strategy to drive sales, but let’s be honest. I’ve made a dozen purchases from APMEX. Do these fools think I’ll buy more gold just because I see their banners when I’m surfing elsewhere without regard to market conditions? Will I open another financial account at Ally when I already have one? Will I be inspired to write and send another news release just because PR Web ads are flashing before me? Not hardly. And if this keeps up I’ll start blocking cookies from my browser or wait for some inventive hacker to bring me a better solution.

In the meantime, all I got to say is I pity those poor souls who visit porn sites since their legitimate surfing experiences may soon be awash with banners of scantily-clad fems performing stuff I never write about in blogs. And won’t your wives be surprised when they surf the web looking for recipes?

One last note: I just bought an arm-load of Proctor & Gamble as a flight to safety. AMPEX, PR Web and Ally will just have to wait. I’m outta cash.

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DNDN: What was I Thinking?

April 29th, 2010 · Runaway Trading, Stock Trading

Rank amateur. Beginner. Newbie. Tyro. Whatever the term, I walked into Dendreon like I was making my first ever online trade. It’s a wonder I made any money at all, but wound up making lots of it, in spite of myself.

For new readers of this rag, you should know that I’ve been trading online since the dot-com days, about 12 years. And during that tenure, I have made every order-entry mistake known to traders. And then some.

I have bought shares when I wanted to sell. I have sold when I actually wanted to buy. I’ve bought 1 share when I wanted to buy 100. I’ve bought 1009 shares when I wanted 100. I’ve accidentally bought shares of stocks whose symbols were disarmingly similar to the stock I really wanted. I’ve mistakenly sold stocks short when . . . well, you get the picture. I’ve done it all.

I thought I had all that behind me, but I guess I’m wrong.

Earlier this week, I sold off most of my shares of DNDN. Then when its price began to fade, I went long again. Still later, I decided (here’s a guy who really can’t make up his mind) to sell off. But, instead of liquidating my position, I doubled it. Strictly a novice move.

I didn’t notice my stupid error until late Wednesday (after writing that blog about another way to make money with DNDN). Anyway, I decided to leave the bet on the table. About the worst that could happen is that it would wipe out a month or two of trading earnings—but that’s not the stuff to slash your wrists about, right?

Well, you know what happened. I was off playing boating games at Minneapolis’ Lake Minnetonka when I checked my iPhone’s trading platform (istockmanager) and discovered the BIG NEWS. Provenge approved. Stock soared. Trading halted.

Rather than race back home and follow the news on my desktop, I took in a leisurely lunch, knowing that trading wouldn’t reopen for a couple of hours.

It was probably the most profitable day in my trading history—and it was all by accident. No, I didn’t become a millionaire (although many did) but I did good. I sold off near the peak, and then repurchased a smaller amount after the market closed. I am expecting a decided gap up tomorrow, what with all the hoopla the major networks heaped upon this story. And then I’ll follow the plan I outlined in a blog yesterday.

Meantime, I am determined to get the H out of here within a couple of weeks. Rome beckons. But so does every other point on the globe.

Happy trading. Hope you made money big-time today.

Charlie, the RT.

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If You’ve Got Plenty of Money (to lose) Bet on DNDN

April 27th, 2010 · Uncategorized

But if you want to play it safe and earn big bucks, here’s an idea

I’m not saying you shouldn’t risk any of your bucks on Dendreon and the forthcoming FDA decision. Au contraire, I am suggesting a little prudence would be in order.

Dendreon, in case you’ve been doing your stock musing from the basement cell of a convent, is the Seattle-based maker of Provenge, the prostate cancer immunological treatment that could well set the world on fire by this weekend —if the FDA issues a favorable verdict on this angst-ridden stock. Well, either way something is going to burn.

Me? For what few shares I own, it’s like sitting on the sidelines. I sold the majority of my shares this morning when the stock (for me) peaked at $41.91.

I am admittedly faint-hearted in these matters, after losing about 90% of my capital in one, silly binary trade like this one. Sheer stupidity. Never again.

And yet I’m seeing a lot of this “bet the farm” positioning on this stock. Somebody is going to make a lot of money—or lose a lot. But it won’t be me. This time, I’m playing it different.

Here’s my thinking. Since this is a binary trade (heads you win big, tails you lose even bigger) why make the big bet on the outcome? Why not get a handle on your greed and bet on the followup. It can be almost as profitable, but much less of a risk.

Let’s suppose that Provenge gets approval. The stock will most assuredly blast-off because it’s a cancer drug and that’s always big (volatile) news. Plus, there’s a sizable (13 million shares) short interest in this stock. But I’m thinking that it will jump from, say, $40 to slightly more than $50.

But, if it hits a snag, any snag, the stock will crater. Some writers are suggesting a drop of 50-55 percent. And from my perspective, I cannot afford to lose half of my trading capital (if I bet the farm).

So here’s my strategy: Regardless of whether the treatment is approved or hits a temporary snag, the share price will undoubtedly soar on the former and tank on the latter.

When the dust settles, that’s when I’ll buy. And with a certain amount of abandon, I might add. This is a much safer bet since DNDN has shown in its last two “decision-based” outings to soar early, fade late, and then offer not only a safer buying opportunity, but a lucrative one as well. How lucrative? Take a look.

On “decision day” April 13, 2009, DNDN closed at $7.01 and opened the following day at $21.40. That’s terrific if you bet long but thousands bet short and lost their collective patooties (look that up in your Funk & Wagnalls). But the stock faded steadily all day and closed at $16.99. Here’s the kicker: If you had bought at the close and held for a couple of weeks, you could have cashed in for a 61% profit.

Same deal back in 2007 only your profit would have been greater. The stock closed at $5.22 on decision day and opened the following morning at $17.92. Profit-takers again drove the price down, this time closing at 12-bucks. But, within 5 trading days, the price rose to $25, a better than 100% profit.

You can do what you will. I’m play it safe and placing a later bet. If DNDN fails to get approval, so much the better. I don’t lose anything. And I can trade intelligently based on the news. Doesn’t that make sense?

See you on the road.

Charlie the RT

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This Market – and my Mind – Wanders

April 18th, 2010 · Runaway Trading, Stock Trading

Frankly, I had expected better things from this earnings season. Sure, the quarterly confessions of many companies are better, but better or not, they’re not moving the needle on my cash flow meter.

Monday may change all that. I expecting some sort of bounce-back from the Goldman Sachs fiasco and the shellacking it gave my holdings, even though the indexes are decidedly red as I write this. Tuesday is the more favorable bet since both Apple and GE report after the bell.

I hold both. And I’m expecting them, especially AAPL, to blow the numbers away. GE could melt the numbers but only move the share price 10-cents. But a good report from Apple would set the stage for a runup on Tuesday of say, 50 or more points. In preparation, I watching the reports of both and hoping to buy loads of Wynn’s Casino (WYNN) after hours since I’m betting it will zoom up to around 90 near-term Tuesday or Wednesday.

Still, since the market seems a little lackluster following that month-long rally, my eyes are wandering off to foreign shores, Icelandic displays of atmospheric ash, notwithstanding.

Free at Last

I’m the first to admit that I’ve been a pretty homebound “runaway trader” in recent months and I won’t bore you again with the reasons why. That’s embarrassing. But sometime this coming week the duties that have kept me stateside these past months will be completed and I can resume my worldwide travels.

But, where to go?

That’s a tough question since I’ve got the whole world and an unlimited timetable to choose from. Since the market will take care of my cash needs (well, it’s supposed to) I’ve created only a passel of self-imposed rules for my forthcoming foray.

1. No itinerary. I’m buying a one-way ticket, probably to Rome, and what happens after that will be anybody’s guess. I may never leave Italy. I may buy a Eurorail pass and travel the length and breadth of Europe. I might return home the next week or the next earnings season. I may take that trek up to Mt. Everest Basecamp that I had to cancel earlier. I may never come back.

2. Mix it Up. Anywhere I hang my hat is where I’ll sleep at night. Snazzy hotels, youth hostels, B & B’s, whatever. Anything but tenting out beneath an ancient aqueduct or a bridge along the Autobahn.

3. Transportation. Who cares? Buy a bike, rent a car, saddle up on a Vespa, take the train, walk, run, hop scotch on a commuter airline. I’m down for any of them.

4. Companions. I’ll be a loner but I meet others easily and wouldn’t be surprised if I am joined on parts of the route by others. The same thing happens on the Appalachian Trail. You meet somebody. You hike together for a few days or weeks; then split company. Nice to know ‘ya. Good luck when you get back to East Overshoe, Nebraska.

5. Money. The market will pay my way, although in reality, my trading profits from the first few months of the year have provided me with enough capital to take a half-dozen trips around the world. Moreover, I keep getting these emails from BootsnAll Travel with all kinds of exciting, round-the-world expeditions they’ve cooked up. And they’re cheap, too.

But, I’ve got a couple of things on my plate before I leave. The book (the one I’ve been working on) goes to the printer this week or next, and, of course, DNDN reports within two weeks. After that, Charlie is Out.

Or if you prefer: Charlie è lontano, Charlie est absent, Charlie is weg,  Charlie on poissa, Charlie är borta . . .

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DNDN? Hold ‘em or Fold ‘em

April 14th, 2010 · Runaway Trading, Stock Trading

I put a Post-It note on DNDN’s message board today in response to a group of posters embroiled in a brouhaha because Ameritrade raised its margin requirements on this stock, which, in turn, resulted in a broad discussion of the whole notion of betting only so many dollars as you can afford to lose.

The fellow who started the crossfire bitched that he had been called by an Ameritrade rep who told him he should diversify his holdings because he owned largely a single stock: some 35k shares of DNDN along with 5k in calls options. The rep was told to piss off.

I don’t know the particulars of this fellow’s investment portfolio but wow!, that’s really a lopsided holding and (if this guy’s on margin) could really produce some pain if things go against him. And as we all know, that’s what the stock market is all about:  I try to take your money; you try to take mine; and the MMs try to take everybody’s.

Actually, I only wish an Ameritrade rep had called me when I was (stupidly) holding 8000 shares of SCT  few years ago. I was waiting for the “big buyout” and took a $30,000 hit overnight when it was made public it was never going to happen. I vowed then I would never bet big on binary trades again. And I haven’t.

I’m Not the Only Cage Rattler

By now you’ve read the downgrade from Citi analyst Dr. Lucy Lu that sent the stock down to a level where I could comfortably buy more. Claiming shares were “priced to perfection” (I don’t know what the hell that means), she pointed to at least one of the issues that I mentioned in a recent blog that could be a formidable hurdle preventing FDA approval this month: The question of manufacturing facilities. (Read my last blog on the subject for more on that issue).

Anyway, her downgrade sort of cemented my thinking on keeping a low profile on this stock. My thinking, if you’ll recall, was that if the FDA delays approval this month, the shares will tank at least 10 points as under-capitalized traders scramble for the exits.

Still, Dendreon’s drug, Provenge, would remain on track for eventual approval. In the short run, though, opportunity looms; a huge number of margin traders are going to get “the call” and will have to pony up extra bucks or sell their positions—at a loss. And a confession here. The only time an Ameritrade rep called me was after SCT imploded.

As far as I’m concerned, the time to buy more shares on the cheap will be after the approval is delayed. That’s when it becomes a surefire trade. And since I own less than a thousand shares of the stock, I can afford to (a) buy lots more; and (b) sit and wait it out for final approval. Time will be on my side. As a matter of fact, that would be a great time to back up the truck to the options desk and start buying options for later this year. But for now, color me chicken as in yellow, but I’ll hold my tiny cache of DNDN and wish all you daredevils the best of luck.

Meantime, I’m nearly done with that book that’s been hanging over my head all winter long and as soon as it heads for the printers, I’m outta here. First stop:  Rome. From there, who cares? Just runaway. Just go.

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The DNDN Update: We’re Slipping into the Doldrums

April 13th, 2010 · Runaway Trading, Stock Trading

You know about Doldrums, don’t you? That’s a famous belt of calms and light winds between the northern and southern trade winds of the Atlantic and Pacific. It’s a notorious place where three-masters of yore became becalmed for days, even weeks, trapping sailors who couldn’t find enough wind to escape the tropical prison.

Any way, now that you’ve had your geography lesson, I can report that shares of Dendreon (DNDN) have finally slipped into the Doldrums where they sink in price because there’s no news to revive them. And this drift is likely to continue until the “big news,” whatever it is, is announced sometime in the next couple of weeks.

DNDN is Not For the Faint of Heart

I’ve been picking up more shares of DNDN, 100 here, 100 there, as it slides lower. My experience in waiting for big bangs (mergers, FDA approvals, refunds from the IRS and the like), is that the stock usually fades before the kill date, rather than rises. But what’s important here, as far as I’m concerned, is that I still don’t own so many share that I’ll get banged up if the FDA doesn’t approve their wonder drug for prostate cancer, Provenge.

Still, I notice that my conservatism hasn’t stopped jillions of others from betting big-time on this stock. Those who commented on my last post on this subject, were in at least   1900 shares. But even with that trade, you can drop 20,000 smackers if the miss the prevailing wind and catch a tropical hurricane of sellers instead.

But those writers were real pikers compared to a poster named Karhug, who I chanced to exchange cybermessages with about a year ago. I touched based with her again, wanting to know if she was still in the game. She wrote back:

“I have reduced my position from 67k shares to 50k shares and looking to sell another 10k shares in the low 40’s before final decision and then hold the remaining 40k shares for the very long term.”

That’s what I call, putting your money where your mouth is. DNDN has turned Miss Karlin (I don’t know if that’s a first or last name) into a millionaire and she’ll earn another million if Dendreon gets approval. But as I recall, she first got into this stock when it was selling for less than a Big Mac, so her ultimate risk is really both large and small, depending on your vantage point.

Either way,  here I am, too chicken to place another 2000 shares into the slots, for fear I’ll go broke when I do it.

Yet, I do have a method to my madness. Suppose, just suppose that the FDA turns down Dendreon’s bid, claiming it wants to review the laboratories where patient blood will be immunologized—just to make sure they’re cleaner than New York subway tunnels.

That delay will crater share price. BUT that very act will make final approval, sometime in the future, a virtually sure thing once facilities are deemed acceptable. Yeah, I know, that’s a moronic bit of thinking. But I need to dream up some excuse or I’ll bet the farm on this stock.

And I don’t want to do that. I just want to runaway. And in a cupla’ weeks, I’ll do just that, DNDN, or no DNDN.

Charlie, the RT

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Five Lessons I Wish I had Learned Before I Started Stock Trading

April 9th, 2010 · Runaway Trading, Stock Trading

I received an email from a kindly gent the other day who asked me for advice about trading stocks. He is confessedly new at the game, and like anyone with brains, wanted to avoid the pitfalls that savage the naïve tenderfoot.

Here’s his note.

Dear Charlie,

You have done a great job on your blog! I have just finished exploring your site and I loved it! There are so few of blogs like yours. I think in all of the searching that I have done yours is the second and by far the best I have found. It is very inspirational to see your success. And now I have more confidence then ever before that it can be done. I just wanted to say thank you for creating your web site and for sharing all of your knowledge and experience. I was also wondering if I might ask you how long it took you to achieve your current success on the markets? I’m just starting out trading the markets and I was wondering if there is any advice you could offer that would contribute to my future success. Maybe some books or possible web sites to view? Thanks Again. Best Wishes, Your Friend, Daniel

I am afraid that offering advice is a nettlesome business because so few recipients (I include myself in that headstrong company) actually take the advice and benefit accordingly. It’s only after countless pummelings that you really begin to understand. As the poet Keats observed, “Nothing ever becomes real till it is experienced . . . ”

That’s why the myriad of books written about trading (and day trading) rarely turn tyros into trading champions. The only way to get good at anything is to stay the course. Sooner or later, you’ll learn how to be a winner. But here’s the kicker:  IMHO, the fewer personal hangups you have, the sooner you’ll become consistently profitable, since anyone can learn the technical aspects. But if you can’t overcome your private tics, you’ll never make money.

With that in mind, here’s what I’ve learned at 10 or 12 years of trading. Perhaps other readers can add their own “do’s and don’ts.”

1. Anyone can make money in the stock market—if you hang with it long enough. I say that because everyone reading my words has to overcome what I think are personal hang-ups to become successful. Some traders, for example, are overly fearful about losing money; others are overly greedy, and still others might not have sufficient time to tend to their trading garden, and so. In other words, it is not training and experience about the technical aspects of trading that spell their ruin, but rather, their emotional baggage.

2. The more money you bring to the table, the easier it is to make money. I am unsure of why this is true, but it is. Perhaps the scarcity of capital enhances one’s fear factor and leads to more “emotional trading.” After all, if you’re trading with your unemployment check or your social security allotment, placing a profitable trade is not just nice, but necessary for your survival. But maybe you’re the kind of person (again, think about personal hang-ups) that trades more confidently when you’ve got plenty of capital to cover your goofs. Or that rare individual who trades just for laughs. Money, either losing or winning, doesn’t mean a thing.

That doesn’t mean that, as a neophyte, you should throw your life’s savings at the market. Obviously, there’s a learning curve to this kind of gambling, and your beginning bets should be in line with your ability to absorb losses—since you’ll have many. But once you’ve developed the critical mass of trading skills, having plenty of capital is a surefire way to earn lots more. In my case, I (again, an experiment of one) didn’t feel really comfortable trading until I had $50,000 in capital. That enabled me to trade, with margin, anywhere from $150,00-$200,000 daily.

3. Avoid betting the farm on long shots. If you’re looking for a foolproof way to lose every cent you own, bet on binary trades: the yes/no, X/O trades that crop up every so often. From my personal experience, I have lost more money trading those few stocks than all other trades combined. And once you lose your trading capital, the game is over. It’s the sort of thing that drives trader over the edge (guys like Mark Barton, for example). My comeuppance was betting 8,000 shares of SCT wherein I took a $30,000 overnight tar and feathering that took years to fully recover from. But, in my last post I mentioned the bets traders are taking on DNDN. That’s a binary trade: Heads, the FDA approves the stock (and it soars); Tails, the FDA does not give approval (and the stock craters). Yes, I own some DNDN but only a few hundred shares—yet if you read the comments on that blog, there are many others who are betting fortunes on this turn of the cards.

4. Cut your losses; ride the winners. This bit of advice, offered by every trader who’s ever written a book, should nevertheless be your mantra. Never, ever, hang around to take what I call, The Big Hit. I never allow a stock to backpedal more than a few percent since it might well keep on going down. Yes, it hurts like hell when you sell the stock and it reverses field, but it’s far more painful to take the full brunt of a loss which could be huge.

On the other hand, let your winners ride. I admit I’ve been trading for a dozen years and still have trouble with this pair. I have to practically beat myself to avoid cashing in too early (yes, I know you’ll never go wrong making money).  But, I’ve got this hangup . . .

5. The trend if your friend. Boy, I’ve heard that bromide many times, but I never took it to heart (remember what Keats said?) until I witnessed some major swings in the market that spell hyper-profitability or mega-loss. I felt, for example, that the market really turned a corner back in January, and I started to take some longer term positions. I wrote about that back in March.  But, the market is now riding so high it reminds me of the dot-com days when you could buy a BMW with the profits from an afternoon of sharp trading. Yes, you can afford to be aggressive. Yes, this kind of market makes everyone feel like they’re trading pros. But, that won’t always been the case. Strategies that work today may not work as early as tomorrow. This market is going to fade, and when it does, I’ll be sitting on the sidelines until it makes up its mind where it’s going. If you don’t know; wait.

Now it’s Your Turn

OK. That’s what I’ve learned. On yeah, I have my own bag of trading tricks I use allthe time, but I think traders — through trial and error — develop their own “rules of engagement.” If you can to share, add some thoughts to the comment page, or even email me a whole guest blog if you like. I’m sure my reader Daniel, and many others, would appreciate it.

Charlie, the RT

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