Monday, November 5, 2007

October Review Part 2

As I said in part one, I was very pleased with my October results. Here are a few of the things that I learned in October.

1. Have a structured investment plan, with percentages of money allocated for different goals / risk levels. I could be wrong, but I believe that at my level, having my money in one account maximizes my buying power. However, since I have multiple needs that need to be met, I needed an investment plan allocating percentages of money to both investing and trading.

2. It is ok to use margin responsibly. The amount of money I paid this month in interest was a tiny fraction of what I made by utilizing it instead of selling stocks at the wrong time.

3. Do not sell investment stocks as they move up.

4. Your percent gain on a trade is expected to be much less than on an investment, therefore your percent acceptable loss needs to be less. At my level, I'm looking to make about 3 to 5% on a trade. When I started trading I was allowing for about a 10% loss like I do on my investments. This was a huge faux pas. The loss tolerance needs to be commiserate with my target gain.

5. I personally, at my currently level of ability, am able to watch 3 stock level two charts for trading. I currently am trying to watch the charts for 7 stocks. This may be doable some time in the future, but not today.

6. Learn a few stocks rhythms, and trade them. I'm currently only trading upswings, but once you get good at that you can trade the same stock in both directions.

7. Do not invest or trade stocks that you have lost money in before, just because you like the stock.

8. When trading, find the trade channel. Buy low, sell high within the channel.

Always perform your own due diligence before making any investment.

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