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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76420  
Subject: Re: Looking for Advice Date: 11/10/2006 4:15 PM
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Yes, you need a discipline. I suggest that you read about CANSLIM - O'Neil's "How to Make Money in Stocks". I do not practice CANSLIM, but the book is very informative. The problem I have with CANSLIM is that it is extremely time-consuming. Another good book to read is Achelis "Technical Analysis from A to Z". Also read Mandelbrot's "The Misbehavior of the Markets". This will not help you trade, but it thoroughly demolishes the academic studies which assumed a normal distribution to the fluctuation of stock prices, and the random walk stuff.

You need a good technical analysis tool. I use Fasttrack, but there are others. You can see a good example of a Fasttrack screen for market timing on my site:

http://www.actwin.com/kalostrader/VisualMethods.htm.

Fasttrack is also excellent for picking good mutual funds.

The Mechanical Investing board is a good place to look. Read a bunch of back posts about market timing and selection of stocks. My objection to their way of doing things is that they hold for a fixed length of time - 30 days or more. While you can certainly make money that way, the introduction of a fixed holding period, along with fixed days to trade, injects an artificial constraint and makes the backtest less reliable.

I use a mechanican trading system based on FastBreak, which works on the Fasttrack database. It is described at

http://www.actwin.com/kalostrader/RSExplained.html

That's me in the blue bandana <GG>.

Never buy a stock unless you know why you are buying it and the conditions under which you would sell it.

Do not be afraid to use margin if you pay attention daily and are willing to cut your losses promptly. I would not use more than 50 cents of borrowed money for each dollar of your money, however. You have to be unemotional about selling a loser. The people who really lose money in the market are those who "just know" that the stock cannot go any lower, and will turn around any day now. In 2000, sometime after the big sell signal in March (when I went to cash), I walked into my brokerage to make a deposit. There was a guy there with a certified check for $30,000 to deposit to avoid a margin call. Well, I don't know what happened, but from the general condition of the market in subsequent weeks, he probably had another margin call.
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