Hello, I 've been mostly just buying sp500 as an investment but in april 2020 when most stocks crashed I started to buy individual stocks as well. Some stocks were really insanely stupid buys and I lost money on them but with some I did really good. For example I bought alcoa and CAR . I must admit I didn't research them much . My reasoning was really dumb. I knew Alcoa as we were buying a lot of their products and their market cap seemed so low at that time. So I bought some stock and options. With CAR my reasoning was , it will either go bankrupt or it will recover eventually when corona is over and people will travel again .So I bought 2 calls on CAR. So I lost money on some stupid stocks but I made enough on AA and CAR. I still don't understand how could AA and CAR went up that much that fast and I would like to repeat that success but it has been more and more difficult lately . I don't think I even bought 1 stock for long term that did great in 2021. Most did ok, some outperformed sp500 some didn't. Looking back ...Was AA or CAR predictable? I must admit I was just lucky with those 2. Charts looked horiffic...and I didn't check fundamentals much but I think they were bad as well. I would like to find companies like that in the future and avoid the stupid ones. So , Did anybody see that coming with those corona effected companies that crashed? Did anybody see alcoa,car , nvda, tsla etc..? Thank you
Just borrow the idea from Mark Douglas's Trading in the Zone. Not all beginner will have such luck. In his book, Mark Douglas' zone is the mind and the market is in sync. This state can only be achieve momentarily. It is possible that the beginners are in the zone. Another observation make by Jack Schwager's Zen of trading. Any stress will fail. Beginners carry less baggage.
Sounds like you are very nearly selecting your stocks at random. You should learn to use a scanner to watch for things like suddenly increased volume or volatility, or patterns. You can watch the news, too, and extrapolate from current events. Like pandemics or wars, to use two good and timely examples. Otherwise you are probably better off with index ETFs. If you have a list of stocks you just like to trade, watch their charts. Not just the 5 minute chart, but also hourly and daily charts. Look at indicators such as Bollinger bands, and moving average crossovers and stuff. For day trades, consider small cap, low priced stocks that don't get as much attention from the big trading machines. The little guys can make big moves! Watch for potential ABCD moves or Bull Flag moves, especially early in the morning session. Opening Range Breakouts, too. Google those strategies. For long swing trading or buy and hold, the big stocks and the index ETFs are gonna probably give you a lot more joy. You don't want to bet the piggy bank on a company with 11 employees that can't pay the light bill. As for where to set your stops, it's all about how much you want to risk on an idea that a stock will go the way you want it to. If you think your chart is telling you that you have a reasonable expectation of making $10/share and you want your rewards to be 4x your risk, then obviously you will set a stop initially at $2.50 below where you will buy in, and you will probably want to take profit on at least some of your position at $10 above, so a limit sell order there. Meanwhile, when the price is significantly in the green, you might want to move your stop up, just so when and if you stop out, you are locked into the green and will have at least a little profit, or at least not a loss. Lots of factors besides allowable risk can come into play. For instance, obvious levels of support. It may seem at times that when you set a stop, you always get stopped out, and then the stock shoots up and you have a small loss instead of the big win that you could have had. It may also seem that you are losing a lot of money getting stopped out because your stop was too tight. Or too loose. Set it where it is a really bad idea to hold the stock if it takes a dive. Keep your risk significantly less than your projected profits. Don't risk $1000 to make $500. Risking $500 to make $1000 is maybe okay, if you have good reason to think that you will make your nuts. Risking $50 to make $1000 is a lot better, if you are pretty sure you have a resistance above your stop. Wherever you set it, don't move it down. If anything, move it up, to lock in some of your profits. Or consider converting it to a trailing stop. Stops have always been the bane of my existence. It always seems like they were too high and I missed out on a rally, or too low and I should have cut my losses earlier. Nevertheless, they are a valuable tool and you will lose a lot more money without them, than with them.
Fundamentals can be researched like I think a lot of airline stocks are incredibly low at the moment(stating the obvious a little) especially in the UK and Europe. There are ways to identify it simply finding out which industries have been hit hardest by the pandemic and now war. Some of these companies are extremely solid like Ryanair and their stock will rebound. Research is key Then as the post above so brilliant put you from 'growley monster' you have to have a strategy and a plan. These are key above all else. The risk to reward is so key it is the fundamentals and basis of being successful. There are many different ideas on these plans but that's where backtesting and your own due diligence come in.
Thank you all. Growleymonster : I will have to research what you wrote as I don't understand most of it. Still I am wondering . If you looked at CAR,AA,NVDA fundamental and technical data on march 2020 , do you think any of you who have been involved with stocks for years would see potentially great returns? If one could identify stocks like that , even 1 in 20 stocks would make you really rich. Also this kind of approach seems more enjoyable then swing or daytrading. I know it is probably not possibly to get data as they would appear in 2020 but I am really curious .
Honestly, the fundamentals I find boring and irrelevant. My wife usually reminds me when earnings are out or a dividend is announced in whatever I am holding. My news feed is basically cute baby animal vids and propoganda about the ukraine war, or scare stories about the latest and worstest covid variant on youtube. We don't have a TV. I look at price and volume action, whether it is for a quick scalp or a months long swing trade or indefinite buy and hold. You ought to get yourself a good book on swing trading, another on investing, and MAYBE one on day trading, which is an endeavor that ultimately will probably cost you a lot of money to learn, if you ever do. Most of them all regurgitate the same strategies and stuff, so just pick one that has sold a lot of copies and isn't over a few years old. Study, don't just read. If a year in, your books aren't full of underscores, margin notes, hoghlighter, and folded down pages, you probably don't really get it. I am not going to try to look up the reports on those stocks, but just looking at the charts, obviously if you had bought CAR any time in 2020, especially at the covid dip, you would be sitting pretty with it now. AA has performed phenomenally, too. NVDA has been spectacular, too. Buying and holding any of them in 2020 should have made you some VERY good coin. The thing about buying and holding stocks is even in a monster up trend, over months or years you will see some monster draw downs. You can just take them and shut up, or you can sell at the top reversals and buy at the bottom reversals. There are a lot of strategies for this but all of them rely on predicting what in the short term is often a coin toss situation. Take AA for instance. Looking at the day charts, with standard Bollinger bands, it looks like a top reversal. When a stock rises quickly and penetrates the upper Bollinger band, then pulls back or hesitates with a spinning top doji, it is fixing to drop like a rock. Also, you will see that 18 days ago, it did the same thing. Well, that's a good time to take some or all profit, and once it does start down, a potential short sell situation. But this doesn't always work. Stocks don't always follow our logic. We can draw all the trend lines we want, but the stonks don't always pay any attention. Stupid stonks. I know I am using some terms that maybe you aren't familiar with, but it will all be explained in whatever book you pick. Look at this chart and you will see what I mean. Look at the top reversal on the 4th of March. Now look at yesterday, and today. See the similarities? What would you bet that the stonk won't hit the bottom again, like it did on the 11th? Then bounce right back up? What a stock DID is what it CAN do again, and MAYBE what it WILL do again. Or maybe it is just consolidating and it will shoot up another $8 or so per share once it drifts away from the top line a bit. I know this, if I was holding AA right now, I would sell. If it then touched the bottom band or a historical line of support, and pulled back up, I would buy it back again. I would likely be right. I could well be wrong. And that is why stops. I would set my stop in that case to just under the bottom band, and buy when it is at some arbitrary height above the bottom line, say the bottom of the previous candle, or the second green candle to form, or whatever. The Bollinger Bands are what is called a study, and available in most charting software. It is a good one to become familiar with. Moving average crossovers are another popular indicator. Just remember, an indicator only indicates. It doesn't exactly predict. We do that ourselves. We extrapolate from the charts and decide if a stock is going to go up or down. Here's the thing. When you are doing it, so is everybody else. When you see a sign that a stock will rise, everyone else sees it. What do they do? They buy. What happens when everybody wants to buy a stock? It goes up. That is largely why indicators work. Stocks don't give two craps about indicators. Traders do, and traders push a stock up or down. Now in the couple of minutes it took me to write that, AA went up 70 cents. Looks like it will ride the top band for a bit, so I was wrong about the reversal. Still, it was a good play. You aren't losing money when you are taking profit. Never chase a stock going up. I wouldn't buy it back right now if you poked me with a red hot branding iron. I would wait for a dip and bottom reversal. Or buy something else that is right where I want it. So you can see, you have some homework to do. A couple of good books. Oh, and don't buy all the stuff the authors try to sell you. Just read the book. You don't need courses or chat room memberships or coasters with inspirational messages on them. I would also urge you to get a paper trading account, so you can play for funsies instead of keepers, and try out stuff. If you want to day trade, which isn't a really good idea at this point in your education, this is absolutely essential.
Thanks, you have some patience and talent explaining things. I really appreciate your insight . I think I really have to start taking it more seriously and start studying . I always wondered how can TA can work if everyone is looking at the same indicators but your explanation makes perfect sense: " Here's the thing. When you are doing it, so is everybody else. When you see a sign that a stock will rise, everyone else sees it. What do they do? They buy. What happens when everybody wants to buy a stock? It goes up. That is largely why indicators work. Stocks don't give two craps about indicators. Traders do, and traders push a stock up or down." Nobert that is an interesting documentary thank you .