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STRAT
25-04-2008, 11:57 PM
This is obviously the most important decision we all make. The rest of the decisions we make are a matter of managing the information around why we made the first one.
I as some of you know mostly play small time with penny hopefuls.

Im not as slick as a lot of you. I prefer to keep it simple and try not to get out of my depth as much as possible. This is what I do.

I try and keep my finger on the pulse of the global situation. The main driving forces of all markets and individual sectors I like to play in. I look for sectors that are down and may be due for a lift.

I look over countless penny dreadfuls looking for one with fundamental prospects. Once I have found a stock that takes my interest I do the basics. Check their website, read company announcements and look over the charts. Check the Market cap and how much money they have in the bank etc etc. I pay particular attention to whether the money will run out before I plan to get out of the stock and market cap to potential up side ratio.

I look for threads pertaining to the stock on the boards and read through them looking for any additional useful info. In particular whether management has a good reputation and whether previous announcements have been accurate or not.

A company may be due some news that is significant. I do my best to evaluate the chances on that up coming announcement having a positive outcome. If the odds are in favor I trade on the result of that announcement. If the odds are not in the companys favor but the market is still taking interest I trade into the build up over that announcement, getting out before the news comes.

I watch the boards for hot tips ( ST and SC ) and sometimes get tips from some people on these boards. When I do I go through the same process with the stock I have taken heed of the tip on

Once I have found something I like I move to my very limited TA skills to find out what the stock has been and is doing in terms of trading looking for an entry point. If it has or is running I leave it. ( this means of course I miss out on stories like MAK :( ) I try not to chase stocks that have already run.

This is just a skim over how I go about choosing stocks and of course every choice is an individual situation. Sometimes I might buy a stock cause I like the name :D or someone said I should :D:D. There are no hard and fast rules and there are exceptions to all rules but one must have a plan in place.

Im keen to know how the rest of you go about your selections and with some of you I already know or think I do. Below is how I see some of you relating to this important part of investing :D. If nothing else the last paragraph should mean I get a few replies :eek:.
I would particularly like to hear from Steve Fleming, Winner69, Phaedrus, Halebop, Placebo and Lizard. I have a great deal of respect for many people on this site including everyone I have mentioned in this post.

Macdunk
Talking to the tea lady of the company in question and reading the tealeaves

Bermuda and Oiler
Industry Knowledge

Shasta
FA and in depth dissection

The Shrewd One
Industry knowledge and help from dad

Halebop
26-04-2008, 09:05 AM
Mechanics of Investing & Trading (On a forum I suspect aka Throwing Yourself To The Lions)...

TA vs FA vs Whatever. I have my own views and methods but really, who cares? Have a system and understand it. Be adaptable rather than dogmatic - markets treat different approaches differently at different times. A cookie cutter approach will only work some of the time. While people point to "Buffett" and others as examples of "sticking to their knitting" they don't properly analyse - Buffett adapts and changes according to what the markets and mechanics allow him to do. Don't be fooled into thinking that a "value" (or any other) approach means the same thing all the time. It just means getting something of value for less than that value. It doesn't preclude a different modus operandi.

Historical Context. It has all been done before and that there is never a "new paradigm". Understand when penny stocks work. Understand when trading works. Understand when speculation works. Understand when (and oh god how!) long term investing works.

Risk Management. The simple absence of losses exaggerate the winners. The only dependable risk management technique is total avoidance. Risk cannot be "managed" because you won't know all the questions let alone all the answers. Historical context is the driver of risk management - if you understand how things blow up you don't need to know precisely what and when it will happen - just the need to avoid it. It you don't understand this sooner or later you end up owning shares in MFS or Petshop.com at the wrong end of the cycle.

Benchmarking. You can't perform without a scorecard. Use reasonable benchmarks to measure your performance against others taking similar risks. Be honest with your measures - you are only costing yourself money.

Online Forums. People have different agendas, experience, risk tolerances, IQs, EQs, Networks etc. You are not them. By all means research a ramped share here but follow your system and not their agendas, no matter how many posts, how many posters or even what the share price is doing.

Cash vs Debt. This is a very personal choice but a use-cash-only policy allows me to sleep well at night and pick over the carcasses of debt funded investors "the morning after". While people can debate good debt versus bad debt, there are always periods where any debt is bad, and having cash at these times is very good.

STRAT
26-04-2008, 10:39 AM
Mechanics of Investing & Trading (On a forum I suspect aka Throwing Yourself To The Lions)...

TA vs FA vs Whatever. I have my own views and methods but really, who cares? Have a system and understand it. Be adaptable rather than dogmatic - markets treat different approaches differently at different times. A cookie cutter approach will only work some of the time. While people point to "Buffett" and others as examples of "sticking to their knitting" they don't properly analyse - Buffett adapts and changes according to what the markets and mechanics allow him to do. Don't be fooled into thinking that a "value" (or any other) approach means the same thing all the time. It just means getting something of value for less than that value. It doesn't preclude a different modus operandi.

Historical Context. It has all been done before and that there is never a "new paradigm". Understand when penny stocks work. Understand when trading works. Understand when speculation works. Understand when (and oh god how!) long term investing works.

Risk Management. The simple absence of losses exaggerate the winners. The only dependable risk management technique is total avoidance. Risk cannot be "managed" because you won't know all the questions let alone all the answers. Historical context is the driver of risk management - if you understand how things blow up you don't need to know precisely what and when it will happen - just the need to avoid it. It you don't understand this sooner or later you end up owning shares in MFS or Petshop.com at the wrong end of the cycle.

Benchmarking. You can't perform without a scorecard. Use reasonable benchmarks to measure your performance against others taking similar risks. Be honest with your measures - you are only costing yourself money.

Online Forums. People have different agendas, experience, risk tolerances, IQs, EQs, Networks etc. You are not them. By all means research a ramped share here but follow your system and not their agendas, no matter how many posts, how many posters or even what the share price is doing.

Cash vs Debt. This is a very personal choice but a use-cash-only policy allows me to sleep well at night and pick over the carcasses of debt funded investors "the morning after". While people can debate good debt versus bad debt, there are always periods where any debt is bad, and having cash at these times is very good.
Thank you for your reply Halebop. Excellent advice as expected. Its gratifying to find I am already practicing many of the points you have raised.

Of particular interest were your comments on risk management. It may be a contradiction in terms to talk of risk management and penny hopefuls in the same sentence but certainly diversification and a cash only policy are two rules I dont break. The amount of money being played is also very relevant.

Totally agree with your comments about Forums. One thing that strikes me as important is the gatherings held by members of this Forum. I have been to a few and know who goes to the gatherings in other parts of the country. Putting a face and name to a poster does help give credibility and insight into motives. Ive been hanging around like a bad smell on this forum for a while now and it does take quite a long time to get a fuller understanding of the person behind the posts.

I/we have strayed away from the intended purpose of the thread somewhat as it was a discussion about stock choosing rather than trading/investing in general that I was trying to initiate.

Crypto Crude
26-04-2008, 11:26 AM
Strat,
Are you trying to be funny?...
sometimes I might come out and say I got my dad into a stock, thats about it...
He's into Silver in a big way since it came up from $7....
hes pretty much out of the share game...He sold on the first wave of credit news last year, I listened to him at that time, but U did get back in shortly after... He has no input into my stock selections...
:cool:
.^sc

Crypto Crude
26-04-2008, 11:35 AM
I go to ASX.com and do a listed companies search...
I click on the companies which are in the Energy sector, look at the chart and if I dont like it, and the SP then I move on, Sometimes this causes me to overlook a company...
I listen to others...
I find companies through overlapping projects...
I follow the forumns...
:cool:
.^sc

AMR
26-04-2008, 11:54 AM
The shrewd one uses TA? I thought you were all into drill timetables.

Personally I look at Price first for the last 2-3 years, and then I look into On Balance Volume for the same period to see if the stock is being accumulated or sold down. If it is in an uptrend or tracking sideways with rising OBV then I do my fundamental research.

I then use either a breakout model or a chart pattern to enter above support, with a stochastic oscillator for timing. It's done me well for NZO so far, PRC has given some false signals though.

As for cash vs debt : In my more naive days I bought so many HSI contracts I was afraid to leave the computer for a pee. That taught me how to manage position sizes.

STRAT
26-04-2008, 12:08 PM
Strat,
Are you trying to be funny?...
:cool:
.^scYes I was :p and absolutely no offence or disrespect intended :o

Interesting your comment about overlaping projects. Considerable insight can be found this way. BOW, RPM and VPE is a good example. I also am surprised to hear you use pictures with squiggly lines on em also :eek:

STRAT
26-04-2008, 12:14 PM
In my more naive days I bought so many HSI contracts I was afraid to leave the computer for a pee. .LOL AMR , I can see how than would suck the fun right out of it very quickly :D As to your comment about cash/debt I am cash only. There is no way in hell I would borrow money to play this game the way I do

Thanks for your replies guys