THIS IS MY OLD BLOG. GO TO THE NEW ONE: Guy Tavor

Sunday, August 28, 2005

RECIPE how to make money in stocks - lessons learnt



When I first started out investing, I set a list of rules that would hopefully guarantee I continue to improve my portfolio performance, here are the rules I have set:
  • Monitor the market pulse closely. You’ll get the feel for the market –which is the most important input for gut feeling position closing.

  • Write down all of your transactions. Write down the reasons that drove you to enter or exit a position.

  • When you have the time, and the market is slow, take the time and analyze all of your past decision. Write down the new conclusions you get to, sharpen you tools.

  • If you feel anxious to make a trade, don’t. You are not equanimous, and probably on your way to make a costly mistake.

  • Don’t trade positions below $2,000 – commissions will kill your profit.

  • If everybody’s talking about a stock performance, it’s too late.

  • In a bear market – sell on 10% loss, no matter what. In a bull – 7% will do it.

  • In a bull market – don’t set stop-loss orders, unless you are away and you have to.

  • Make a test buy. Buy a small lot, buy more at 3%, and the rest at 5%.

Recently, my portfolio was doing great. Being lazy as I am, I stopped monitoring the market as close as I should. I have also stopped researching new stocks. Almost half of my funds are in cash, while the market was doing just great. Money management was neglected. My TS stock is more than 40% in the money. However, during the past two weeks I made some terrible buys. I did not research the stocks well enough, I got all excited about my recent performance, that I have neglected all of the lessons I have learnt when the market was bearish. I paid the price. I made some bad purchases with CPTV, SIRI – buying way beyond their breakout point, without going over their fundamentals, without waiting for a buying pattern to emerge from graphs. I got too confident.

Current portfolio
BIDU          -1.68%
SIRI          +12.79%
TS          +47.25%


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