RIDING THE WINNERS
SHARES MAGAZINE - 30th June 2005
By Malcolm Stacey
If you can't beat the brokers, avoid them. Malcolm
Stacey, director of www.ShareCrazy.com
and author of The Armchair Tycoon, recommends private traders
should rediscover traditional methods of share trading to avoid losing
out to the professionals.
There was a time when I studied annual reports, perused
the latest financial news and consulted worldwide trends to decide what
shares to buy, hold or sell. Warren Buffett would have been proud of
me. But not any more. I have dropped this meticulous and irksome approach
and have re-discovered the oldest system in the business. Despite its
antiquity, I have found this strategy is more than sufficient to conduct
my trading activity.
The age old 'ride the winners and cut your losses early'
approach is one which every trader is well acquainted with. Yet though
this often forms part of the mindset, it is rarely used as an outright
strategy.
I have not completely abandoned my study of market
fundamentals. They still have their used and are among the principal
sources of information. The trouble with this approach, however, is
that some very clued-up professional analysts employ a range of magnificent
high-tech tools to do all the same research for them.
By the time I have reached identical conclusions to
all those well-paid experts, it is very often too late and I have missed
the trade. The share price reacts fast to their earlier decisions and
has moved respectively before I, as a mere armchair punter, can take
any action. As a realist, I recognise that in lacking the wealth of
resources the experts have at their finger tips, I am at a severe disadvantage.
By employing a different strategy that suits my situation to conduct
the large proportion of my current trading activity, I bypass this problem.
So riding the day's winners is how I make most of my
profits now. There's no doubt it works. Share shifting is my only source
of income and I've stuck to this strategy simply because it yields great
results.
FROM PRINCIPLE TO PRACTICE
The principle of riding your winners is easy enough
to understand. For this reason, it is prevalent in every seminar, guide,
or book created to instruct beginners. However, it's not so easy to
understand how you translate the basic principle into an effective practice
for day-to-day trading.
Initially, it is important to adopt the ploy so that
you not only incorporate your winners but can use other people's as
well. This expansion develops a simple principle into a comprehensive
strategy with which you can maximise every day's opportunities.
Early in the session, I study the list of 30 or so
winning shares on www.sharecrazy.com. This is where ShareCrazy's internet
share trading community comes into it's own. The Action Stocks list
on the website enables me to filter out the small and large-cap stocks
and lets me note down the ones from the top. I can then set my mind
to work on these companies and let my previous knowledge of them, come
to the fore.
If I still fancy the company in question, I buy some
shares. Not many, say about £300-worth in each firm. And if I
already have a holding in companies near the top of the list, I buy
another £300-worth in each.
No, I very often find that most companies in the list
of winning shares put on even more value as the day wears on. So this
simple methodology has enabled me to secure profit without extensively
researching the day's graphs and charts.
But a consideration of tomorrow's winners' list is
equally important to my strategy's success. This is where the internet
comes into its own once more. With the wealth of up-to-date information
available to me, I can check the list again, looking for some or yesterday's
winners in which I invested. If they're still in the top 30 shares I
put a further £300 into them.
I continue to play this gem of a strategy until any
one share runs out of breath and starts to fall again. Then I sell this
failing holding. The whole process of buying the day's winners and shedding
the losers repeats itself, day after day.
Some of the advantages of this simple method are:
- I exploit the very fastest-rising shares.
- I never have losing shares in my portfolio.
- Big losses are nearly impossible.
- Hugh gains are very possible.
- It needs no time-consuming research.
- It takes away agonising decisions.
I have enjoyed a wealth of success with the simplest
of models. If you would like proof that I really am making this strategy
work for me, see the Crazy Board at www.sharecrazy.com
where you can chat to me online and read my trading diary.
Malcolm Stacey is director of www.sharecrazy.com.
The website offers low-cost share dealing at £9 per trade flat
fee and a series of free and subscription data and information packages
called 'Superscriptions'.
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