Wednesday, December 07, 2005

The Science of One Stock Picker


I am the scientist and have lost my science!
As surprising as it might seem, this is the best it has happen since the evolution of the internet, scientists losing their science to the global community of services is such wonderful event, specially for living room amateurs like myself.
As individuals, in our living rooms, making a buck trading (or applying the law of the next sucker) we were comfronted with the constant threat of the asymetric knowledge and these are serious disavantages. The asymetric knowledge is build on the system of monpolized superior information by corporate greed supporters.
In fact, today many large trading corporations follow the moves of some of the larger systems of trading. The purpose of teh effort is to cannibalize on those opportunites. Watch out! If you are using trading method that is well advertized all over, and you have a hard time getting the promised results, you better be aware that some big boys are in it for the take, and your money is their play ground. You are their take.
As we continue this infatuation with risk by privatizing all support systems for our future, the stock market is the easiest way to gamble pensions and other assets. Thus, the need to learn some of the statistical help one can get for gambling in Wall Street with your money.
The kind of gambling that occurs with equities is more dangerous than playing Texas hold-en. When you engage Wall Street in your game, you are engaging the souless people in this planet willing to do anything to take your money and use any method force any law to accomplished. You will hear more stories of grandiosity than of terror, the fact of the matter is that equity trading has a ratio of 20 stories of deception for one of affection. The reason you hear the affection stories is becuase the people who get caught in the losing end are usually "small people" as Leona Hemsley put it and we are insignificant for the news, becuase we lose a little at the time, but when the winner of South Street call it, the win is or gargantuan proportions. As an example this year the average bonus for a middle to top management employee in the firms of Wall street is going to celebrate Santa with a check of two million plus. Do you hear well, two million for X-mas in bonus at an average, or playing with OPM. Well this guys are also the big spenders in lobbyst against minimum wage and secure pensions for the rest of us.
Let's put this out of the way and to the meat of the post.
If you plan to gamble some money in stocks, you must follow a few fellows tactitians who have done well with a few formulas. The first idea is: No all stocks react similarly to all markets conditions, thus some stocks are profitable using specific indicators to buy and take profits(sell). By using RSI 14 (.75-.25) for long an short entries some stocks demostrate excellent behavior others are just dogs, stay alert and narrow your winners to their most profitable and reliable mathematical behavior. Second some very bright guys have follow consistent methods and they have the accumulation of returns on their bank, my favorites screens are: Martin Zweig on value and growth, next is the neofacist O'Neill growth, then in "dull" markets like the present stagnant situation, Graham value and enterprising is the one method to follow. The difficulty here is to select the top winners of the three selection methods. This is where the science begins.
You can use the resources of msn.com screener or my favorite aaii.com. I also use Schwab screens as additonal tool. After I have a list I screen every single stock using investors.com ratings. But my final decision is to intuitively base my picks on going forward strength based on their fundamentals and people who manage the company.

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