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Subject:  Trading the Pennies Date:  9/24/2018  7:11 PM
Author:  Arindam Number:  3894 of 3938

"Investing the Pennies" just doesn't have the same ring to it as "Trading the Pennies". But I do mean this project to be an investing gig, not a trading gig, directed toward them working '40 for the man' and who haven't the time to 'trade', which --depending on the context-- can be a fairly meaningless distinction, because market time is fractal and profits can't be spent until positions are closed.

But Stan Weinstein does distinguish between 'traders' and and 'investors', and so will I. If the first breakout is your signal to put on a position, you put on half and are a trader. If you wait for confirmation, you're an investor and go all in. Not exactly aligned with that distinction is one Ben Graham makes between 'Defensive', 'Enterprising', and 'Speculative'. Penny stock investing is generally considered to be 'speculative'. But I want to gear back the risk and make it merely 'enterprising'. That means positions aren't opened unless the breakout is confirmed, though exits are done if even a hint of trouble is anticipated, which is where I strongly disagree with the Buy-and-Hope crowd. If the market is telling you to get out, don't argue that it is wrong.

Some ground rules:

- FA + TA = RA. [Fundamental Analysis plus Technical Analysis equals Rational Analysis]

- If you're not a 5%-10% owner, the company you're betting on doesn't know you exist and isn't managing itself for your benefit. So, rent stocks; don't own them.

- Bogies like "beating the market" or high win/right ratios are nonsense. The profile of a classic, brute-force, trend-following system is around 35%, but is profitable, because left-hand tails get chopped. To borrow a sports proverb, "Managing risk --which is different than avoiding risk-- isn't everything. It is the only thing."

- If it ain't fun, it ain't worth doing.

Three books I depend on:

Ben Graham, The Intelligent Investor [an intro to value investing]
Justin Mamis, The Nature of Risk [an intro to technical investing]
Harry Domash, Fire Your Stock Analyst [an intro to fundamental investing]

Two songs I never tire of hearing:


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