Scottrade Stop order service is Disappointing.

Few weeks ago, I started to get interested in HomeBuilder Stock (XHB). I place a stop order to buy the stock if it hit my preset price at 20 dollar. At that time, the stock was around 17 dollar. I put a order "good until cancel" Few days ago, the stock climb and finally it hit above my stop order. I was away from the computer in the whole day so I didn't check until late evening. Then, I found out my order is not executed! I was pretty upset because the closing price was already above 21 dollar, 1 dollar above my stop price. I was confused why my order is not executed. Next morning, I phone the branch and talk with the "broker" and ask for what happend. The guy give me some non-sense answer. I know the person I was talking to is new and don't even know very well what a stop order means. I then asked to talk to the branch manger. He put me on hold and he phone the market maker company and try to find out the reason why my order is not executed. After waiting, waiting and waiting, finally, he told me there was a "error" from the market maker yesterday and my order is not exeucted. To compenstate, they will buy the shares for me at $20.50. I then ask how you come up with $20.50, and he said that's the best they could do! Dudh! I was not very happy because I know if the stop order is executed right at the time when ASK above my stop price, it will become a market order And my price would be near 20 dollar. I have no way to track what price I could have got, so I couldn't do much but accept the price. I always thought Scottrade is a national brand with "exceptional customer servie", and they don't screw customers. Obviously, I was wrong and I have to consider switch to other reliable investment broker for future trades.

Mr warren buffett's wisdom on investing

I've been reading a lot of book about how the greatest investor all time think and his philosophy on investing. It's really a great learning experience and I enjoy it so much. He has great vision and patient in stock game. One of the greatest lesson I learn from him and I think this will change my way of investing forever is followed " When everyone fears, you should be greedy. When everyone greedy, you should fear" This is powerful and straight to the point. Basically, Mr buffet always buy stock and invest when no one else does. People will laugh at him of buying stock which is out of favorite by most people. In other words, he wait for a crash of a paticular stock and he buys with both hands when price is selling at discount. He believes the stock's price is priced below its intrstic value and it's just a matter of time when others realize the value of the stock and start buying, and hence, price rise again. He is very patient, sometimes, he will hold on a stock for as long as five years to wait for the price become over value. Then he sells his holding to everyone who buy near or at the peak. He is a truly buy-and-hold master. I will combine his thinking into my stock selection system. The couple stock I've been watching are stock related to financial, real estate and home builder.

Moving Average

Using moving average is an helpful way to determine the trend of the market. The popular technique is to using a fast moving average , say 10 days, and a slow moving average, say 30 days, and plot these curves on top of the price chart. Whenever the fast moving average cross the slow moving average, it indicates a trend is developing. If 10 days MA cross 30 days MA, this means prices is on the rise. I found that using 2 moving average is helpful to determine the trend of the market. But there could be a lot of WHIPSAW, (MA cross above and below frequently), it could be quite confusing. Therefore, I will use one more slower moving average to helps eliminate whipsaw. A 50 days MA is useful in combination 10 and 30 days. Thus, I'll wait MA 10 cross MA 30 AND MA50 as a true confirmation of the trend. It still not perfect, but at least it can eliminate some whipsaw compare using only just two moving average.

TDAmeritrade Backtest strategy feature

Few weeks ago, I have a friend told me the online broker TDAmeritrade. It is discount broker like scottrade, etrade, that charge discount transaction fees compare to traditional broker. The interesting feature that attract me is the back test strategy they provide to the user. Basically, one can enter a set of trading rule (entry and exit condition) based on certain technical indicator and test it with the real historic data of the stock you're interested. It let you see how much money you make or lose based on your input trading rule. I open an account with them few days ago and now is busy testing the trade idea I've had in the past. It is quite an impressive tool so far. I'll update with you when I find a formula that I like and have consistent winning result.

Stock is NOT for LONG Term

"This stock is for long run" We usually hear this comment from people when they bought a stock and saw the price drop, drop and drop. Seeing the money draining day, after day, after day. Instead of selling the stock and cut the loss early, people will say "That's ok, this stock is for long run, it will come up" This is a losing mentality. Why would a person want to hold the stock for long time? What's the reason you want to buy stock at first place? The simple answer is: You want the stock price go higher your purchase price so you can profit the difference. If a stock does not do that, why'd you still holding it and HOPE for the long run? Stock is not like real estate, when a particular stock go down in value, it's not necessarily come back up. There are zillions of reasons why stock price go down. And if you don't understand why price go down, you wouldn't understand why stock price will go up neither. So, the smarter things to do is : Cut your loss immediately, preferably less than 10%, so you can limit it from serious downfall of the stock price when you see the trend is turning against your expectation.

what I learn from recent market crash?

Dow Jones index drop almost 1000 point from the last 10 trading days. This is the biggest drop and bear market for the entire year 2007. Many people lost the entire year profit in just one single week. Wow, that's a really bloody market! My positions also get hurt in the last few days, especially for the purchase I made in last few weeks when the market was peak. Anytime I make a mistake or bad move in the stock market. I like to go back and study what went wrong and what could I do next time. Over the last weeks, I spent a lot of time to learn different kind of technical indicator and check the validity of them. For example, if the indicator is correct, it should have told me to stay out the market BEFORE the crash. While most indicator fail to indicate, I do find one particular impressive one that I find useful to indicate bear market. That is MACD. Moving average convergence divergence. I encourage you to check out this interesting indicator to keep track of the market so you can learn to STAY OUT the market when bear is coming. When you Google MACD, you can find great info on the net. Whenever divergence becomes negative, that's the signal to stay out!

stockcharts.com

Recently, I'm spending tremendous amount of time to learn more about stock market. I want to learn the in and out and use Internet to gather useful resource to analyze stocks. I was using yahoo and msn's financial charts in the past. However, the more I learn different type of analysis, the more I found them less efficient and effective. The chart is not very up to date and sometimes even inaccurate. One of my friend recommend me to give a try on one of these site, and I found them very helpful. This is WWW.STOCKCHARTS.COM .
I highly recommend it, the interface are user friendly and professional. All the popular type of technical analysis, like MACD, William %R, Moving Average data are well displayed and updated. I think from now on, I'd rely on the chart information from there to do my stock study.

Opportunity: Commercial mortgage industry companies

With the recent turmoil in sub prime market, many financial lenders are badly affected in their quarter's earning performance. CitiBank, Wamu, WellsFargo are all trading currently at their 52 week low due to overall negative mortgage industry environment. But if we look at it closely, the sub prime mainly affecting "Residential" market. What I mean is these are related individual with low income or bad credit bought a house with price they can't normally afford. With interest rate resetting, these borrowers 's payment is increasing dramatically, and because of their lower income, they can't afford it anymore. They walk away leaving the bank's bunch of bad loan in their account, badly hurting bank's business. However, it rarely happens in the "Commercial" market. Commercial here refers to projects like shopping mall, hospital building, office building, apartment, warehouse. Since the underwriting guideline in commercial market are much more tightened and require a significant high down payment from buyer to initatie the loan process, commercial lenders are seldom at risk for their mortgage not getting paid on time. Therefore I believe commercial lenders 's business is minimum, if any, affected by the sub prime. With recent drop overall mortgage companies in stock market, I'm betting the commercial lender are going to perform well. These are the lists of stock I'm betting on . Check it out here. The earning for these companies are coming out next week, it'd be interesting to see how they do in 3rd quarter and their projection of future business.

Stock chart technical analysis : Candle Stick

Tonight, I want to share some of my recent learning on stock technical analysis. Basically technical analysis is more for short term trade. It doesn't pay as much attention on company's fundamental, earning, sales growth, debt level, etc. Instead, it focus on the price movement, the volume, the trend. Understand the technical analysis can potentially help you to decide the entry and exit signal and increase your chance of winning. The above chart is the first step to understand technical: Candlestick. It shows the open, close, high and low price of the stock you're interested every trading day. You can view the price 's past performance using candle stick in the stock chart. Check out an example here (link) There are many analysis and price pattern evolve around candle stick. I will take next few nights to demonstrate a couple of useful and powerful signal to tell investor the entry and exit point of a stock.

Magic Formula Investing works like Magic for me!

Tonight, I want to share my experiencing using Magic Formula Investing concept to buy and profit from stock market. The Little book that beat the market, arguably the best stock investing book ever written from Wall street Analysts. This is a very easy to read and understand stock investing book I'd recommend to people. Basically, the concept is followed: Mr market is a very emotional guy, his decision in short run may not make sense, but in long run, he is a logical being. This means that sometimes he offer a stock at a very high price, but other time, he will offer you a bargain. It is magic formula's mission to find good company at bargain price. It is that simple!
How do we define good company?
According to magic formula, it looks at how much the return is generated from the invested capital or the return on assets (ROA). The higher the better.
How do we define bargain price?
Magic formula look for company's earning from the price, or earning yield, kind of like the reverse of P/E. Again, the higher, the better
Magic formula look for the universe of stocks and rank each company based on the above two measurement. Every day, it will update the list on the website: http://www.magicformulainvesting.com/
I've been buying stock from the list for the last six months, and the result has been very rewarding. So, tonight, if you've free time sitting at home watching TV, I highly recommend you go get this book to learn magic formula and how it can help you possibly achieve the north 20% annual return to build your wealth tonight.

Value Beat Growth!

There is always a debate in stock market to invest either in value or growth type of stock. Value stock emphasize on the fundamental date, ie, earning, return on assest. An example of value stock is UST. Growth stock focus on the stock price's growth above average of the relative industry. An example of growth stock would be goog. Few days ago, my company's 401k provider come to my company and give a presentation of the overall stock market over last 20 years. There are an interesting data which compare the performance of value and growth stock. Check out the above table.

It's clearly shows that value beat growth in every size of market. This is a good indicator that for long term success in stock market, we should focus on value than growth.

Just Trade It!

If you want to become professional golfer, what would you need to do? Just Swing it! It takes practise , practise, and practise to improve your golf skill to achieve a higher and higher level and become good at it. No one is born as a Pro. That's the reason Tiger Wood become #1 ==> because he practise golf every single day. To become a successful trader in stock market, what would I need to do? Just trade it. Make mistakes, correct it, improve it and become a smarter and informed trader next round. Few weeks ago, I was reading about the subject writing covered call to generate extra income for the stock I already bought. The idea sounds enlightening. But I tell myself, if I don't do it, I won't learn it. So last week, I jump in and write my first covered call for this stockAHR Even now, I still don't know sure if I make a right decision by writing 2 contracts on this stock. Regardless of the result of this trade, I"m learning and I practise. I get to see how broker credit premium to my sold options. The options will expire in few days and it seems that most likely the option will expire worthless. This means I could have the opportunity to write again next month! So, whenever you learn idea about investing, the best advice to start small, expected to make some mistake and correct from it. This learning process is priceless to build your wealth tonight.

EX DATE is coming..

Since I decided to dedicate a portion of my stock investment into high yield dividend stock, I started to pay attention to EX DATE. In order to get the dividend payout for the quarter, I learn that I must buy the stock before EX date to be eligible to received dividend. Anyone buy on EX date or after will not get the dividend income. Right after EX date, I can sell the stock and I can still eligible to receive dividend. The interesting pattern I found is that the stock price will "automatically" reduced by the dividend payout amount on the opening of EX DATE, then the price will go back to normal after few days trading session. This could be an opportunity to buy the stock if your stategy is to ignore the dividend but betting purely the rise of the stock. One of my favoirte dividend payer stock FRO , which have a yield >15%, will have EX DATE tomorrow (10/10/07). The payout amount is impressive $3.25, or 6.25% assuming stock price $50 dollar. I bought this stock few days ago anticipating receiving this handsome amount of dividend. It'd be interesting to see how FRO trade tomorrow morning. My plan is to sell one or few days after ex date at the price I bought so I can receive the full amount dividend (6.25%) owning this stock just a week or two.

Wrong questions to ask lead you wrong result!

Five years ago, I purchase my first stock thru an online broker. I have no idea what I'm doing. I get curious about stock market when everyone around me is talking about how easy to make money. Without any knowledge in stock investing, I remember I will ask people I ran into, my boss, my doctor, my neighbors, and even the person who cut my hair this question " which stocks I should buy?" Everyone around me seems to be expert and they will tell me a list of stock symbol to buy. I collect this list and buy these stocks. As you may guess , my return is pretty ugly. I think I've lost a couple grand just by asking this questions to people I ran into.

I didn't let this setback discourage me from investing stock. I just know I need to become more educated. I read books, I attended seminar, I listen to educational program to learn how to make money in stocks. I figured out I 've asked the wrong question in the beginning and that's the exact reason why I lost money. Now, I learn to ask the right questions to people I ran into : "What system (method) I should use to screen, time in and time out stock?" Interestingly, almost on one around me can tell me any thing or don't have clue what I'm asking. The amazing things is after I learn the screen method that fit my investment style, the time in to buy and time out to sell (either capture a gain or minmize a loss), my return has been gradually increasing. If you're interested to learn what are few of the system I'm using (maybe not be the best, but it's making money consistently for me), simply leave a comment and say "529pm, tell me more!". I'd love to share what I know (my stock investing method) to you if you're interested to know. I'll reveal my method when there are 10 comments to this post. Will you comment? $D

Buy high sell higher

The old folks saying " Buy low sell high" just don't quite work for me, especially when it comes to stock investing. The biggest problem is when you buy low, you really don't know if the price has hit the bottom or still going down even more. Nobody knows. Even if the stock price is not going any lower after you bought, the second problem is when the stock going high again? Will it be next week, next month, next year or in some extreme case, never? So, "Buy low sell high" is a pretty risky method for me. Instead, I follow the method "Buy high sell higher" A things in motion tends to stay in motion. When a stock is at the 52 week high, it tends to keep getting higher and higher. Then, I use (the system ) to sell portion of my holding one at a time to capture the gain and continue enjoy the ride. Of course, nothing is guarantee in stock market. We just have to use the method that has higher chance to win than to lose. Buy high sell higher works out great for me.

Super lucky day!

Today is probably one of the most luckiest day in my stock trading experience. One of the stock I bought few months ago, PWI, skyrocketed return with over 30% gain in today's trading session. The reason is because it has entered an agreement to be acquired by United Arab company, with purchase price 26.75 per share. Stock immediately jump from 20.50 to 26.75 in today's opening. With this dramatic jump of the stock price, I sold the stock as soon as I see it in this moring to capture all the gain. I'd say this is not skill involved, it's just pure luck on this stock I own. It's feel good to be lucky $-)

Two indicators to stay out stock equity market

While everyone of us want to make the big return in stock market, sometimes, it's more advantageous to stay out the market when market become unfavorable and decline. Two great indications to signals I use are :
1) stay out market when interest rate is rising. When rate go up, business will have higher cost to expand and growth is slowed. Also, think of stock and bond competing money from investor. When bond rate increase, more people will buy bond instead of stock. This could means stock's demands is less and price tend to fall. I usually compare the interest rate in the beginning of each month and compare its with six months ago. If the current interest rate is slower, I'd be more cautious to get into stock market
2) stay out market when 6 months treasury bond is higher than 10 year treasury bond. This is called inverted yield curve. Normally, the longer the bond period, the higher interest rate investor is supposed to receive. However, in some unusual situation, short term bond rate happens to be higher than long term bond rate. This phenomena could indicate that recession is around the corner. It'd be not a bad idea to leave the money in money market or saving account until the 6months treasury bond is lower
These 2 signal applied only to U.S market. If you 're investing in international market, these 2 signal does not has much correlation and not applied. Interest rate is dropping, yield curve is normal, so I'm investing more into stock market these periods.

Full force into equity market in next 2-3months

With FED reducing the rate by 0.5%, stock market has soared last two trading days. My portfolio has took the biggest increase of the year, rising almost 7% in last two trading days. It's exciting! I 'm going to put in more capital into stock market to capture the growth. Few area I will be focusing are ETF, Value Stock, Stocks that pay dividend, and using option to turbo-charge the return. I'm aiming to make another 10% (min) gain in my overall portfolio. I will give you update from time to time.

FXI . A simple way to capture the CHINA growth

If you ask me which stock I'd buy today to has the highest possibility growth in the next 6 months, I'd definitely tell you to consider FXI. It is an index fund designed to represent the performance of the mainland China equity market that is available to international investors. The price YTD (Yield to date) increase is just SPECULAR!40% in 9 months. A lot of people say China stocks has gone up too much, and bubble soon. But my feeling is that the party is still far from over. With strong GDP growth China experiencing, and the bullish environment in the overall economy, China stocks is continuing to grow. 529pm prediction: this growth will continue until the summer next year, which china will hold the Olympic game. After Olympic game 's over, FXI may have major price correction. So, my strategy now? Jump in and enjoy the ride!

What should we do when we see a gain in a stock?

This is a million dollar question, give it a serious thought for this question will help you make more money in stock market. Usually there are two things people will do.
1)Sell it. But wait, what if the stock price continue to rise? We will be kicking ourselves of "selling it too early" I used to own this one stock NVDA. After I sold it for a small profit, the very next day, the stock jump over 10% in few hours trading session. I just left regret and watching it go up with no stock on hands.
2)Hold onto it. But wait, what if the stock price tumble after reaching some new high. I had an experience which the stock price go from $5 to over $18 in a short period of time. I was so ignorant, thinking the stock will hit 30 dollar soon. So, I didn't sell a single share. Well, the stock crash down after some bad news earning! Now the price is sitting around 3 bucks!
Obviously, the above 2 ways are not very intelligent ways to handle the stock when it has a gain. Now after all my bad experience, I will tell you the 3rd way to help you build wealth.
529pm: sell a portion to lock in the gain gradually. EX:
When stock has risen and reach more than 7-10% of original buying price, you should sell half of the stock to lock in your gain.
When the stock price has reached 12-15% of the original buying price, you should sell a quarter of stock to lock in more gain.
Finally, when the stock has made 20% or more advance, you should sell the remaining quarter to capture the remaining gain.
I do believe that's the best way to answer the questions on topic. What's your thought?