Thursday, April 7, 2011

Some tips on how to minimize losses

Hello everybody! Well let's start on this topic by first acknowledging that no matter how hard we try to avoid stocks that will go against us, there is just no way to avoid it. In my opinion anyone who claims otherwise, be very careful when investing your hard earned money. Investing in the stock market has one guarantee and that is there is always some degree of risk.There are many things that one must watch to help avoid losses, and even with a vigilant eye there will be times when a stock goes against us.

First, always pay attention to  the volume being traded. If a stock goes down and there are only a few shares traded that day it is generally not anything serious. On the other hand if a stock is going down and a large volume of shares are being traded it can be a telltale sign of trouble but it can also be manipulation. To tell the difference can be quite difficult but there are many things a person can do to try and interpret just what is happening. What is the share float? If the share float is very tight (low) then volatile trading can easily be attained. For instance if a company has excellent news that has just been released this can cause the stock to become quite volatile as many people are vying for a small amount of available shares.

In another example , and this one you really want to avoid, is what is commonly called a pump and dump scam. This is probably one of the hardest to avoid based on just how devious the people behind the scam are prepared to be. Simply put, this scam is where someone pumps a specific stock saying how it is headed much higher in price and encouraging everyone not to miss out. As people start to buy these scammers will sell into the buying which results in a huge volume of shares being traded and there may be some significant short term rise and then the price slowly drifts lower. Unfortunately this particular scam is easy to get wrapped up in especially for newer and inexperienced investors.

Quite often there are companies that have a lot of news happening and so the price remains constant with little bounces up. This can be quite normal but sometimes one will notice that the flow of news drys up, once this happens watch closely as the price may dry up also, and this can happen to some of the best projects. When buying in the junior exploration sector this is probably one of the most common things we may notice. It really is not that the company is that bad or the project they are exploring is bad, but when the market doesn't hear news somewhat regular they tend to move on to the newest and most current "hot company".

In juniors especially we find many people who buy in at a time when a specific company is "hot", only to find out that they bought in at the peak of that particular rally. In this instance you basically have a couple of choices. One is to hold your position and hope that this company finds what it is they are looking for. Your other choice is to sell as quickly as possible and try to minimize your loss. Many people will tell you that day trading is the best way to make money in stocks, but I have not only found it extremely risky, I have known many who have lost everything trying to daytrade. If you choose this strategy please be aware of just how high the risk is in this area. On a very rare occasion I have day traded but I tend to avoid it most of the time.This is just the tip of the iceberg so to speak for things to watch and implement to keep any losses to a minimum.

To touch on another topic briefly I am well pleased with one of my picks from last Oct. The ticker is WTC and the last few days have been about as volatile as a volcano. Today their was a request for a halt in trading by the company based on a pending new release. I hope for a very positive news release which I personally think we will see.

I guess in closing for this post, I would like to apologize for the way this blog keeps having facial makeovers. This is due to me trying to design the entire blog myself while doing many hours of research and following any of my stocks that I may be preparing to add to or possibly sell. I wished I was a lot quicker at some of the computer things in life, but if you can tolerate my somewhat tardy timing in accomplishing the final look I desire I sure would appreciate it. I obviously have much more talent at stocks than on the computer from a designing standpoint. I hope this has helped some and I will try my best to keep the posts coming as best I can.

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