The Stock Speculators' Ten Commandments
By
William Cate
Traditional Stock Speculators are long shot gamblers. They are betting against odds of 99-to-1 that they can beat the Market. As with State Lotteries, there are a few winners and thousands of losers. You only need to consider the decline in Day Traders to realize the truth of my observation. To win more often than the average stock speculator, you should follow these ten rules.
1. It's Easier to Lose Money than Make Money in the Market
The purpose of the Stock Market is to redistribute the wealth from the many to the few. To be among the few, you must understand the Market. Read books and articles. Attend market-related workshops, seminars and conferences. Talk to stockbrokers, attorneys, promoters, market gurus and investor relation's people. Before you gamble your money, understand the game. Sitting in a high stakes poker game without knowing anything about poker is a certain way to lose your money. Speculating in stocks without knowing how the Market works is a sure way to lose your money.
2. The Market Is Manipulated
Insiders, officers and directors are manipulating the share price upward so that they can sell their stock. Short sellers are manipulating the share price downward so that they can make a profit. As a stock speculator, you are betting the insiders will be the short-term winners of the stock manipulation game.
3. Play the Paper, Not the Business
Stocks are promoted on expectation of share price appreciation and not on business reality. The fact is real businesses are harder to promote than Smoke & Mirror Public Companies. Consider the Junior Resource Company. They are looking for gold in the far reaches of the North of Canada, the mountains of Asia or the jungles of Africa. Currently, demand for nonrenewable resources are increasing as developing countries like India and China industrialize. Metal prices are moving on up. The result is the Investor Relations people can hype both an expectation that the gold price will continue upward, which is probably true. And, they can hype that the public company will find a gold mine, which is rarely true. The result is the share price jumps and the wise speculator makes money by buying low and selling high.
4. Play the Odds
When any stock doubles in price, sell half your shares and you can't lose money on your stock speculation.
5. Speculate in Industries that You Know
To be a successful stock speculator, you must know for certain that the public company's business plan doesn't have a snowball's chance in Hell of succeeding. If you don't realize this fact, you won't sell into the stock promotion and will lose your money.
6. When in Doubt, There is Do Doubt - Sell
You should have a list of expectations for each stock play. These are created from the stock promoter's previous stock manipulations. If your stock play significantly deviates from the promoter's past efforts, get out of the stock play. There is something going wrong with the promoter's current stock manipulation.
7. Time is of the Essence
It may take six months or a year to cleanup a stock for a stock promotion. The actual stock promotion can take as little as a month to complete and rarely takes more than four months to run its course. You must be in at the beginning and out before the end of the stock play.
If you speculate on daily moves in a stock, you will make your broker money. However, it's too little time to see sufficient share price appreciation to justify the risk.
8. Due Diligence is Vital
The public company isn't the target of your research. It's the stock play that you should focus upon. If the hypsters are being paid in shares, avoid the stock play. The hypsters will be selling their stock into their hype. Are the pigeons paying the hypsters for the "hot stock tip?" If so, the hype will be far more effective than email spam or junk faxes in moving the share price. Understand how each stock promotion tactic works and thus its potential for success.
9. There are Market Cycles
But Technical Analysis is Financial Astrology. The Small Capital Markets
tend to fall from October to Christmas each year. The reasons are small capital investors are more focused upon the Holidays than trying to make money. The promoters are selling their shares to have a nice Christmas. And, yearend tax loss selling adds to this downward trend. The Market tends to go up in January of each year, because small capital investors buy after the Holidays expecting to make their fortunes in the following year. These trends are not written in stone. But, if you follow them, you are increasing your odds of success.
10. Know the public company float.
The float is all the shares that could be sold into a stock promotion. This means all the stock that isn't restricted (Rule 144 shares). The larger the float, the less effective the stock promotion. It costs money to run a stock promotion. The greater the float the greater the cost of hype to move up the share price. For an Over-the-Counter Bulletin Board (OTCBB) stock, an attractive float is two million shares or less.
The alternative to being a gambler in the Stock Market Casino is to be a house player. If you are interested in learning how the Market Professionals play the stock game visit: [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/id39.html]
By
William Cate
Traditional Stock Speculators are long shot gamblers. They are betting against odds of 99-to-1 that they can beat the Market. As with State Lotteries, there are a few winners and thousands of losers. You only need to consider the decline in Day Traders to realize the truth of my observation. To win more often than the average stock speculator, you should follow these ten rules.
1. It's Easier to Lose Money than Make Money in the Market
The purpose of the Stock Market is to redistribute the wealth from the many to the few. To be among the few, you must understand the Market. Read books and articles. Attend market-related workshops, seminars and conferences. Talk to stockbrokers, attorneys, promoters, market gurus and investor relation's people. Before you gamble your money, understand the game. Sitting in a high stakes poker game without knowing anything about poker is a certain way to lose your money. Speculating in stocks without knowing how the Market works is a sure way to lose your money.
2. The Market Is Manipulated
Insiders, officers and directors are manipulating the share price upward so that they can sell their stock. Short sellers are manipulating the share price downward so that they can make a profit. As a stock speculator, you are betting the insiders will be the short-term winners of the stock manipulation game.
3. Play the Paper, Not the Business
Stocks are promoted on expectation of share price appreciation and not on business reality. The fact is real businesses are harder to promote than Smoke & Mirror Public Companies. Consider the Junior Resource Company. They are looking for gold in the far reaches of the North of Canada, the mountains of Asia or the jungles of Africa. Currently, demand for nonrenewable resources are increasing as developing countries like India and China industrialize. Metal prices are moving on up. The result is the Investor Relations people can hype both an expectation that the gold price will continue upward, which is probably true. And, they can hype that the public company will find a gold mine, which is rarely true. The result is the share price jumps and the wise speculator makes money by buying low and selling high.
4. Play the Odds
When any stock doubles in price, sell half your shares and you can't lose money on your stock speculation.
5. Speculate in Industries that You Know
To be a successful stock speculator, you must know for certain that the public company's business plan doesn't have a snowball's chance in Hell of succeeding. If you don't realize this fact, you won't sell into the stock promotion and will lose your money.
6. When in Doubt, There is Do Doubt - Sell
You should have a list of expectations for each stock play. These are created from the stock promoter's previous stock manipulations. If your stock play significantly deviates from the promoter's past efforts, get out of the stock play. There is something going wrong with the promoter's current stock manipulation.
7. Time is of the Essence
It may take six months or a year to cleanup a stock for a stock promotion. The actual stock promotion can take as little as a month to complete and rarely takes more than four months to run its course. You must be in at the beginning and out before the end of the stock play.
If you speculate on daily moves in a stock, you will make your broker money. However, it's too little time to see sufficient share price appreciation to justify the risk.
8. Due Diligence is Vital
The public company isn't the target of your research. It's the stock play that you should focus upon. If the hypsters are being paid in shares, avoid the stock play. The hypsters will be selling their stock into their hype. Are the pigeons paying the hypsters for the "hot stock tip?" If so, the hype will be far more effective than email spam or junk faxes in moving the share price. Understand how each stock promotion tactic works and thus its potential for success.
9. There are Market Cycles
But Technical Analysis is Financial Astrology. The Small Capital Markets
tend to fall from October to Christmas each year. The reasons are small capital investors are more focused upon the Holidays than trying to make money. The promoters are selling their shares to have a nice Christmas. And, yearend tax loss selling adds to this downward trend. The Market tends to go up in January of each year, because small capital investors buy after the Holidays expecting to make their fortunes in the following year. These trends are not written in stone. But, if you follow them, you are increasing your odds of success.
10. Know the public company float.
The float is all the shares that could be sold into a stock promotion. This means all the stock that isn't restricted (Rule 144 shares). The larger the float, the less effective the stock promotion. It costs money to run a stock promotion. The greater the float the greater the cost of hype to move up the share price. For an Over-the-Counter Bulletin Board (OTCBB) stock, an attractive float is two million shares or less.
The alternative to being a gambler in the Stock Market Casino is to be a house player. If you are interested in learning how the Market Professionals play the stock game visit: [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/id39.html]