Still being new to the course, I was wondering if someone could put into "the new guy language" , what exactly is trading on margin. I have read that Ted encourages this, but I'm not too sure I understand it completely. What are the pros and cons to it. The requirements and such.
Also, can anyone recommend a good online broker? I was looking at Datek...they seem to have the lowest commissions, and no minimum amount to open.
Any advice is surely aprreciated.
Thanks,
Troy
Panama City, FL
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I recently switched brokerage houses - from Schwab to AF Trader (www.aftrader.net). I like them much better, for there low commisions ($9.95) on all stocks. They also providde option trading (although a bit costly), and are helpful on the phone. http://www.sonic.net/donaldj/query.html
The above website is a very thorough review of all online brokers.
Good luck in finding one that suites you best. Let us know what happens.
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independent "ratings" and "rankings" of online brokerage firms
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August 18 2000, 4:47 PM
I found the below links to information to compare online brokers. As someone new to online investing, I am in the process of selecting a broker. This is something I wish to do only once. Happy to pass on the info to all. Ray.
Ted encourages this in the book, and discourages it in the cassette tapes made later in his life. With margin, you borrow half the price of the stock from your broker, who borrows the stock for you. Be careful! Margin calls are not fun.
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...thank you. I have the book only and feel much more comfortable trading without margin, but admittedly felt like I was missing something about the "margin thing".
Staying power seems critical to the TW style, and margin at times may simply not afford one this.
Thanks again for clearing this up for me and clarifying that trading on margin needs to be approached cautiously.
Lester.
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Good to see ya ramblin' around here. Couple questions if I may ...
I'm formalizing my TW plan and notice a couple of things from you and him in the book that I'd like your opinion on.
When I first started considering this strategy, I looked for the most downtrodden stocks I could find with the longest bases. Real dogs. However, I believe you told me that you don't always look for those stocks ... in many cases the bases you look for are "expensive" by my standards. Could you give me a feel for the advantages of this? I assume there will be more interest in these more expensive stocks ... that there is less chance of losing money on a stock that goes belly up? That the potential is just as good if not better than my cheap stocks at less than $2? Any opinions appreciated.
Second question, it seems that TW did the same thing ... that if you look at the historical charts that show the low bases, in actuality when considering the stock splits which probably occurred, the bases he bought were probably higher than they appear on the historical chart?
Thanks in advance, Good investolating
dc
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I actually look at where the stock IS in relation to where it HAS BEEN, rather than at a specific price level. However, I would add that penny stocks (under $5 by many definitions) behave far more erratically than higher priced ones (with greater risk of bankruptcy too), just as OTCBB stocks are riskier.
I'm not so much interested in the length of the base as in the length of the markdown + base, anything over 2 years being fine for me. I'm even MORE interested in the level of OBV relative to price.
Low price relative to last distribution (waiting for definite end to downtrend, of course), plus high OBV relative to price (buying pressure), and I'm interested. Then it's just a matter of waiting for signs of a breakout. This is what I'm comfortable with these days.
Good question about what Ted did. Hadn't thought about it, but what you're saying makes sense to me.
Good trading, my friend!
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Say dc, I believe TW refered to the dogs of the dow as $5.00 and under.There are a lot of Companys that were once very profitable and have fallen below $5.00.eseward is right about the completion of the downtrend +base.So many people buy on the downtrend and loose there butts.ESEward,right now I am learning about these signals you have told me about. The OBV and BB and some of orphan-traders.Also have been following your watchlist.What to said to dc is pretty much what is on your watchlist.Just getting set up with my TC2000 program.As far as pennystocks go I think if the formations are right and the signals match I would look at some fundamentals to help.With so much volitility in the market fine tunning our position helps.Happy Trades to the both of you.
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Hi Phillip, call TC2000 at 800-776-4940 and they will send you a free cd which explains the software program.This program does a lot.To much for me to explain as newbe to it.Its has charting with technicals and fundamentals.Has 23 indicators for the charts.You can scan 9000 charts with your criteria in seconds.And much more.Twelve simple lessons come with the program. Check it out and decide for yourself.
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OBV is On Balance Volume. A web search will return tons of info.
It's a really simple indicator, and available at most charting sites as a lower indicator.
OBV moving along with price confirms the trend. OBV moving in a different direction than price (diverging) usually signals a trend reversal.
I look for OBV to be building up for several years BEFORE price breaks out of a base. Shows me accumulation. Also, a big price drop with little OBV drop shows the price drop was on LOW volume, so price will easily move back to where it was.
Good luck.
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Ray.