Share Trading
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Share trading successfully is the pivotal point in any investor’s career with stock investments. Learning how to skillfully trade shares of companies for profit is something relatively few investors ever learn. One of the best keys to success is to become a niche expert. The growing economy places resources in increasing demand for the foreseeable future. This fact, in tandem with the bull market commodities and natural resources have been in, make this an ideal sector. In fact, I almost exclusively trade companies in this investment class. Accordingly, I’ve developed several share trading rules of thumb that consistently add to my winning, and I can share market tips with you accordingly.
Share Trading The Timeless Trends?
A key ingredient of your share trading success in the volatile resource sector is to look for predictable buying opportunities. One of these you’ll notice in precious metals is that summer time is generally a bit weaker than the rest of the year. It’s been said that investors in our sector take the summer off. When these companies lose the attention of investors, you can often either pick them up on sale, or else employ a stink bid strategy (which I’ll cover next).
Another time of year to monitor markets is late in the calendar year. Invariably, the junior mining sector will deliver some disappointments. It is filled with companies in the exploration phase of the mining cycle. Whether the results are bad or just delayed, it’s not uncommon for some of these stocks to slip from your entry point. Whether or not they should be sold on fundamental reasons is a completely distinct issue from whether they end up getting sold for capital tax losses in tax planning plans. As fellow investors start to sell stocks that are out of favor, they represent the “weak hands.” Strong hands, such as yours, can gobble up these shares at a discount. It’s not uncommon to see these companies rise 10 or 20% quickly in a few weeks or months as more free market activity resumes.
Share Trading Using Stink Bid Strategies
A tricky, but useful, share trading strategy that works particularly well in the resource sector is the stink bid. Simply put, with the stink bid you just enter a limit order to buy a company at less than the current bid price. In a rising market, you can get left behind. However, in more of a sideways market, you can find impatient investors who are willing to abandon their positions so they can chase the next big thing. When volume is low, and it’s already thin in junior resource stocks, your sellers may outpace your buyers and you can pick up bargains from investors willing to take a hit to walk away. I’ve also seen anomalies in intra-day pricing that can enable a stink bid to get filled too. This is hard to do with ETF silver or gold opportunities where the extremes are averaged out.
Share Trading – All In Or Dry Powder?
One of the biggest questions has to do with timing the entry point. Share trading with any degree of success requires that you optimize your gains so any losses (and there will be some) can be offset with ease. I’ve long stated that there’s a simple solution when you cannot decide whether to buy or wait. You do both. You can just take a percentage of what you are willing to place in one company and start with that today. You can reserve the rest of the capital reserved for that position for a second, or even third purchase.
The key here is to know what to do with the rest of the money. This is where expert advice from a trusted source can be critical. If you think the market is moving away from you. It may be time to scale into your position so you don’t get left behind. An example is the spring of 2009. These stocks were starting to regain some life and adding shares at this point proved particularly profitable.
If you see the position lose value, now what do you do? If you’ve done your homework on the front end, there could be any number of good reasons for the temporary loss. A delay in drilling could make investors exit. This could be a buying opportunity. You could see a massive worldwide liquidity crunch like we had in the fall of 2008. Some of the junior resource companies were down by 90 or eve 95% as these thinly traded stocks were sold mercilessly with people hitting the panic button in record numbers. To not gone on a shopping spree here would have been a big mistake. You can average down unbelievably in those extremely rare instances, and this is one of my strongest share trading tips.
The particular way you increment your way into a position is individual to you. But the strategy is very important. An ancillary benefit is that it prevents you from chasing stocks. If you view it as you are going to “get in” to a stock once, you can have a tendency to just want to hop on board and take your seat on the bus. When this happens, any slight movement up can lead you to believe your all-or-nothing stake in the company is about to never happen. Chasing the stock is a bad idea, but so is being stingy and holding out while you do, in fact, get left behind. The initial stake approach allows you to at least have some skin in the game, and prudent additional purchases can follow.
Stare Trading And The Trailing Stop Slaughterhouse
Share trading resource companies requires that you leave your knowledge of trailing stops at the door. In these highly volatile companies, the “play in the joints” is sufficient to trigger even your generous trailing stops for no good reason. Use volatility as a chance to average down and buy a good company at an even better price. Trailing stops will take you out of that position before you know what happened, and you’ll walk away with a fraction of your capital and a missed opportunity. You’d have to set a trailing stop so far out that, at that point, you’re better off just holding a stock that’s down 75%, as it’s more useful as a share trading lottery ticket than selling to recover what capital is left.
