Low-risk newbie trading strategies

Discussion in 'Trading' started by hapaboy, Nov 22, 2001.

  1. I'm starting this thread to get recommendations from all you gurus here for a new trader. Please assume the following trade parameters:

    1) 100-share lots.

    2) Be in no more than 2 positions at the same time.

    3) NYSE stocks only.

    4) Per-share type of broker (i.e. IB).

    I'm looking for specific stocks or sectors that newbies should concentrate on during their learning curve, and reasons for those recommendations.

    I'd especially be interested in hearing from Don Bright, Gene, and trainers at firms regarding what specific stocks/sectors they have their new traders start out with, and if trading Tier 2 "laggers" is more appropriate for newbies.

    Feel free to offer other tips for new traders.

    Happy Thanksgiving!
  2. MD-doc



    There isn't really low-risk newbie trading strategies. I would rather say that the right approach is to take your time in learning curve, between 2-4 years, 8-16 hours/day, if you are really serious about trading. Only then you can be sure that you are almost most of the times on the right side of the market !

    Low risk stock doesn't exist. You can say rather,"optimum tradable stock " which should have, in my opinion, the following characteristics :

    1. Liquidity through the daily volume around 1.2 millions shares.

    2. Value between $25 - $50. Easy to understand : a gain of 3%
    from $15 stock, is three times less that the same 3%, from a $45
    stock, and ... the risk is the same !!!

    3. Volatility of the stock is visible, by observing the 1-min. chart,
    ( for daytrades ). No big spikes, no weak volumes, etc.
    The candles should never have huge and numerous tails ( one after the other ) ; that it's call ''fuzziness", and is poison, for
    trading, especially for the stops !!!

    4. Intraday ranges : more than 3-5%. Check the 10-day 15min.

    5. Stock's behavior : go with it, for several days, or better
    weeks, see how it's behaving at: open, 9:40, 9:50, 10:00(great
    reversal time ), 10:20 and 10:30 ( again reversal time ),

    6. ALL this can be accomplished either by having a stock BASKET
    or utilizing scanning. I am an adept of the first, because you
    finish by knowing really good your stock's members. But careful
    the membership of the stock's BASKET should be "dynamic" or
    better said "cinematic". Once, it doesn't fulfill your imposed
    characteristics, get rid of him.... for the moment !!! This is what
    we call "the perpetual cycle " of the market.

    7. Once you select your stocks BASKET, you can follow them, really
    very closed and find out about, so called "success" parameters :

    - stock pairing within the same sector ;
    - stock(s) going with or against its( their ) sector,
    - sector going with COMP or against ;
    - who are the tier 1 ( 2 ) within its sector; you can easily classify
    for trading decisions, tiers 3, 4 together with tier 2.
    - do not forget about stock's rotation within a sector, and
    sector's rotation within an index ( intermarket analysis ).

    8. NOW, we reached " the question ": Which stocks are tradable ?

    Tell you what I did.

    I observed the COMP's movement, for weeks, even months, and ... I found out that most of the time, the following sectors, signify more than 80% of the flow : SOX, GSO, GIN, GIP, NBI and IXTC.
    Now careful Happy Boy... the % of each sector's contribution, within the COMP, is changing like hell, every day; but that doesn't bother us, we got the most influential sectors.

    Now you go at "quicken.com" at "compare", with a stock that you
    believe, let's say, it is in eg :SOX, and you will be happy to see all the members of its industry, with the adequate turn over. Once you have that, go to the charts, and observe thoroughly the above points 1 through 5.

    " Quicken compare" , should give you, most of the time, tier 1, because of its capitalization.

    And please do not ask for "gurus" anymore ! They will make you pay "dearly" for their "theoretical experience" !

    Hope, I've been of some help for you Hapaboy !!!

    Good Learning !
  3. Yes, this was of extreme help to me and I'm sure to other newbies out there! Thanks for your critical analysis and input!!

    OK, let's get some more ideas on this thread!

    Gotta run, food's a-waitin'!! :)

  4. Hapa,

    MD-doc speaks a vital truth here ... if you remain a conscientious student of this great game, the learning process that will take you to moderate competence can easily take 2 years or so. It needn't cost you too much in capital, if you start out trading with small lots and nail the technique/s and discipline down. But the road of trading is a tough one ... don't underestimate it ... you will endure every conceivable emotion when traveling down the road to your hoped for destiny as a self-sufficient trader. Good luck.

  5. I do appreciate your words of wisdom. I have applied with a proprietary trading firm and am wondering how their new traders weather the learning curve. I have been reading Hitman and Stockkbroker's journals with great interest. It seems they have been able to become profitable within a couple of months. I may be wrong, but it seems unlikely that prop. firms would allow their traders to remain unprofitable for years and keep them on.

    Thanks again and I hope you folks are enjoying Thanksgiving!:) :) :)