So today I decided that the best stock to buy right now is Walter Energy, Inc. (NYSE: WLT). WLT broke out today up 4.16% on volume 132.77 % higher than average. It closed today at $115.12. It sports IBD Smart Select Ratings of 80+ and A or B. Earnings are up 471% over the prior quarter. While I like the stock's ratings, I do have to say that I'd prefer to buy a stock that is priced in the $15 to $50 dollar range. But of all the stocks today, I felt it was the best one to buy based on it's technical chart. It broke through what I considered to be a long term price resistance today on strong volume.
This is the first stock that I will be purchasing with real cash. As you might know, I had been using a stock simulator up until this point. As you might also know, I am a strong advocate of investing with real cash as soon as possible. Practice as long as you feel is necessary. For me, I am ready to move to real cash and learn from real market action. This is the best teacher.
While there are many opinions on how much cash you should invest, if you are just starting out, you are going to have to bend the rules as far as the recommended position sizes go. What I decided for me was that I would invest in a $1000 block for my first trade. What this means is that I can purchase 8 shares of WLT.
I am going to set up a profit target of 20%. This will make my target sale price ($115.12 times 1.2) or $138.14. At the same time, my loss limit will be 7% of my purchase price ($115.12 times .93) or $107.16. I will only be invested in one stock at a time.
I'll keep you posted on my first stock market investing purchase with real cash. Good luck on your own.
Looks like you hit your stop. Good pick! But why did you arbitrarily set a target at 20%? Why not use trailing stops at support levels along the way up to see if you can get an even higher profit? (Not that I see any at the moment close to the current price of WLT.)
This is what I am currently struggling with in my trading. Try to hold as long as possible or set arbitrary price targets.
Thanks for noticing the status of my stock pick. The price I got in WLT at was actually a little higher than the closing the previous day. My entry price was $117.46 so my target price is actually $140.95 (117.46*1.2). Yesterday we hit around $138 which was great but I still need to go a little higher to hit my goal. I'd actually like to see it go a tad higher anyway to help cover my transaction costs which round trip will be $19.98 at TD Ameritrade. I chose a 20% price target because that is one of the things William O'Neil recommended. He suggests shooting for being right one out of three times and trying to get achieve a 20-25% gain when you are right, limiting your losses to 7-8% when you are wrong. In any case, I'll also watch to see if I think it will go higher. It's been on a good run though so I am not sure what will happen. I will definitely take a least a 10% gain no matter what. Let's hope higher.
One additional thing about profit objectives. I recommended PPO to a friend of mine over the last month or so and he finally sold it after I told him it was no longer on my watch list. I'd actually told him to sell it earlier when the market went into a correction. He held it and it did turn when the market did. He locked in a gain of 20%. a few days later it went up again and he said "sold it too soon". While that might be the case, you can't argue with a 20% return in one month. Get in the habit of hitting singles (20% gain) consistently, then work on squeezing out some doubles (40% gain), then some triples (60% gain) and finally aim for the home run (80%+ gain). It takes a lot of drive to get a stock up 20-25%. It's probably gonna pause anyway. Once you sell it don't look back to buy it again but do look back at your trades to see if you are selling way to soon. Review them 3 months, 6 months and a year later.
Stocks are a lot like gambling. A lot of people get ahead and then they give it back because they played too long. Don't let this be you. Take your gains and limit your losses.
Thanks for the comment. It was good to see someone is out there reading my stuff!
Thank you for the quick reply. I just read your posts on selling and they are very helpful. I find tons of info on the net about the correct buy points, but barely anything about a method of selling.
I'm familiar with O'Neil's 20% methodology. If it was as straightforward as sell at 20%, that would be great, but he adds that side rule about keeping it for eight weeks if it hits 20% out of a base within three weeks of your purchase. That is hard to do! I'm trying that now on a stock, but keep itching to sell it all as it continues to edge upward.
I think maybe you have the right idea about starting out with singles until you feel comfortable with how things play out. It is definitely more simple and less stressful.
One more thing I worry about is that since I'm in a taxable account I really have to make more profit trading short-term than I would long-term. O'Neil's book says not to let that be a driving factor, though.
Yeah, everybody is buy buy buy...but no one nails down selling very well. Never be afraid of selling early I say. It's better than watching it disappear. I trade in a tax deferred account. If you can do that, you'll have one less thing to worry about. Good luck and keep in touch.
Right now just try to save money, as much as you can in a high interest sngvais account. There are lots of online resources where you can paper trade (virtual stock trading) and get info on stocks in general. Before you even think about investing you should have at least $3,000 in sngvais.Is one that I would recommend