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Matthew Sumpter @ILikeMatthew

F3 Emmet

Joined May 2009
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Continuing with @CharlesSchwab and @ScottThompsonCS Stock Investing for Beginners series: What to Buy. Technical Analysis: Study of historical price and volume to determine a trend Fundamental Analysis: Analyze a company's financials to find value or potential growth.
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- Statement of Cash Flows: where the money is going, categorized into Operating, Investing, Financing. Look at liquidity, efficiency and overall financial health. The above are all quantitative concepts as opposed to qualitative. These also include P/E, P/B ratios and ROE
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Qualitative Concepts: Business Model, Competitive Advantage (moat), management quality, industry analysis, economic analysis (GDP, inflation, interest rates) Use stock screener to find stocks based upon quantitative measures.
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Plan Your Trade and Trade Your Plan (@CharlesSchwab) Review, Refine, Retest Investing Styles: - Growth: focus on stock appreciation potential, less on intrinsic value or dividends. Buy High, Sell Higher - Value: focus on stock trading at a low-price. Buy Low, Sell High.
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- When to Sell: Set initial stop 1% below the 50SMA on a daily chart. Adjust up on 2 green arrows. Adjust down on 2 red arrows to 3% below the low price of the day. Daily Routines: - Review open positions for the stop adjustment signal - Review watchlist for buy signals
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Weekly Routines: - Determine the market posture of the major indices
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Investor Psychology (@CharlesSchwab) - Losses will occur and are part of the cost of investing - Learn to control risk - It's important to control how you psychologically deal with losses - Focus on avoiding losses, not how much you can make on a trade.
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Position Sizing: Come up with a "risk amount", how much you're willing to risk on a given trade. Generally a percentage of total capital. Many traders risk no more than 0.5 - 2.0% of their capital per trade. If you have $100,000 of capital, you may only risk $500-2,000/trade
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Create a risk-to-reward ratio: short term traders may use stops and targets to evaluate a potential trade (i.e. potential for $2 loss and $6 rewards is a 1:3 ratio) - How much are you willing to lose on this trade? - Are you willing to lose that amount 3-4 times in a row?
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