Stock Trading Bootcamp: Part 4
Plus, three ways to generate more yield
In this podcast, we conclude our Stock Trading Bootcamp four-part series with invaluable trading wisdom that Jerry Robinson has learned from his nearly two decades of stock trading. This is not your basic stock trading material… this is real-world, practical lessons from an actual trader.
The first lesson is that markets can be irrational, which is why Jerry does not try to guess or predict what will happen to the stock market or an individual stock. Traders can lose a lot of money by trading based on what they “think” will happen. Instead, Jerry has learned to trade based on what is “actually” happening with the markets or an individual stock. This is called trend-trading. And as the famous economist John Maynard Keynes once said, “Markets can remain irrational longer than you can remain solvent.”
The second lesson is that there is always someone on the other side of a trade that is often smarter and/or more well-informed than we are as retail stock investors.
The third lesson involves criteria for choosing stocks to buy. My personal criteria are:
- Volume must be above 400,000 shares per day. (If a penny stock, then a least 1 million.)
- Trade at least 100 shares.
- Stack the odds in your favor by investing in industries that are bullish.
- Don’t chase stocks. There are far too many.
The fourth lesson Jerry shares on the podcast is to cut your losses and let your winners run. Know when to sell your stocks. Never let a winner turn into a loss. Don’t be afraid of seeing red. Stocks go up and down. You will lose at times. The goal is to win more than you lose. 51% winners is all that you need to be successful. One way to cut your losses automatically is by using a Stop Loss order through your brokerage account. This type of order automatically triggers a market sell order when the stock dips down to the price you specify.
Lesson #5 is to never take advice from phone solicitations, direct mail, or unsolicited email. These types of marketing schemes tend to push stocks that will never make you any money, but will make the marketer a lot of commission.
Lesson #6 is to be extremely careful with penny stocks. They are illiquid by nature, which means that it could be hours if not days before you can sell the stock if it starts plummeting. Penny stocks are also the object of many “pump-and-dump” schemes in which a marketer/share owner will generate a lot of excitement about a penny stock (usually through email marketing) and ride the stock price go, only to dump the shares later for his or her own gain. Only buy penny stocks with capital that you can afford to lose completely.
Lesson #7 is To not use market orders. Protect your capital with limit orders.
Other lessons Jerry shares with listeners:
- Don’t jump into shorting stocks until you have plenty of knowledge and a little bit of experience. This is a quick way to lose your shirt in the markets.
- Don’t fall into the trap of thinking that the market must move higher for you to make money.
- Buy damaged stocks, not damaged companies.
- Don’t try to time the bottom in a stock or in the market. It’s like trying to catch a falling knife.
- Don’t be afraid to sit in cash.
- Remember, there is always a bull market somewhere.
Tom Cloud – Precious Metals Advisor
Jay Peroni – Certified Financial Planner
Finding high yield opportunities in a low interest environment is quite the challenge. However, I use a low-risk investing approach focuses on safe, high dividend stocks that can weather any kind of storm that might come our way. Utility stocks, REITS, and MLPs can offer a conservative way to get more income without sacrificing growth potential. CPFL ENERGIA (CPL) is a utility stock that pays a 4.5% dividend; W. P. Carey Inc. (WPC) is a REIT and pays a 5.9% dividend; and Nustar Gp Holdings (NSH), an MLP, offers a 6.3% dividend.
BOTTOM LINE: Utility stocks, REITS, and MLPs can offer a conservative way to get more income without sacrificing growth potential.
Disclaimer: Investing involves risk. Always do your own due diligence and consult a trusted financial professional before making any investing or financial decisions. Jay Peroni is a Certified Financial Planner and is part of our Christian Financial Advisor Network. FTMDaily is affiliated with Jay Peroni and Faith Based Investor, LLC.
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DISCLAIMER: The above trading ideas are from my own personal stock watchlist and are for educational and informational purposes only. They are NOT specific buy recommendations. Trading stocks is risky and you could lose all of your money. Trade at your own risk. Jerry Robinson is not an investment advisor. You should always consult a trusted financial services professional before making any financial or investment decisions. READ FULL DISCLAIMER.