"In films murders are always very clean. I show how difficult it is and what a messy thing it is to kill a man."Alfred Hitchcock
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Forex 101: Make Money With Currency Trading
For those unfamiliar with the term, FOREX (FOReign EXchange market), refers to an international exchange market where currencies are bought and sold. The Foreign Exchange Market that we see today began in the 1970's, when free exchange rates and floating ...
The Benefits of Buy to Let Investing
The housing market has recently been experiencing a bit of a slow down. Although this might have come with a sigh of relief from the first-time buyers, it has left some of those thinking of investing in the Buy to Let market in a bit of a quandary. Is it ...
The Realities Of Market Timing
Market timing systems are based on patterns of activity in the past. Every system that you are likely to hear about works well when it is applied to historical data. If it didn't work historically, you would never hear about it. But patterns change, and ...
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Q. What is a basket?
A basket is a group of up to 50 stocks that you can trade, manage and track as one entity.
In another article, I wrote about a rather conservative method of being in the stock market. See: "A Triple Dipper: How to Make 3 Profits on 1 Stock" at http://www.traderaide.com/Selected_Articles/Tripple_Dipper.html.
This time let's talk a little about trading "baskets". The definition above maybe needs to be expanded just a bit. You can trade baskets using longer term buy and hold strategies, a shorter-term swing trading approach or as a day trader. A basket of stocks is nothing more then any group of stocks that someone has grouped together for any of a number of reasons. They may be of the same sector, or they may be made up of a number of stocks in different sectors.
An example of a few baskets could look like what is sited below. To save time and space I'll use the stock symbols only. You can look them up later if you are interested. Let's say you see stem cell research as the thing of the future and wanted to be invested in it. If you don't know which stock is going to fair the best, you may want buy a basket of stocks that is made up of ASTM GERN and STEM. This would be a basket of stem cell stocks. Now let's say you think the Internet stocks look good and, again, you are not sure which ones will do the best. In your Internet basket you may want to pick up some shares of EBAY, YHOO and AMZN. Obviously your basket can contain any number of stocks you want. Many online brokers will actually allow you to set up baskets in your account, and you can put in a sell order all at once on the entire basket or pick and chose which ones you want to sell. I'm not recommending these stocks in any way, shape or form, but merely using them as examples.
Okay, that's pretty basic, but I'm sure you get the picture. The examples above would more or less be the type of baskets you would probably be thinking of holding for some time and not day trading.
Most day traders have an entirely different kind of basket of stocks. A day trader may have any number of stocks in his trading basket that he or she has been become very familiar with. They have studied them and even charted them for intraday movement (I hope) for some time and have learned the trading habits of the individual stocks. They have a fairly good idea of how the stock moves on a daily basis with or without news. They have knowledge of how it reacts to earnings, analyst upgrades, analyst downgrades and other events that may be reoccurring. They have also probably learned how they trade when hit by surprise events as well. They know which market makers to watch the closest. They also know who the main market maker in the stock is, often referred to as the axe.
A day trader's basket may be any number of stocks. A good average could be somewhere between 25-50 stocks. But it may also be larger or smaller. I have known traders that traded one stock all day long and nothing else. I have known others that were able to watch 300 stocks. Personally, I think that is way too many.
When I was trading I had a basket of about 75 stocks. Some I knew were only going to be in play on news or when reporting earnings. Others were fairly reliable moves on a daily basis. And still others were extremely sensitive to any sort of news or event.
Today, if I was going to put together a basket of stocks, I would be looking at the following symbols: GOOG, TASR, TZOO, AIRT, QLGC, SYMC, PLMO, KMRT, EBAY, SINA, RIMM, RMBS, PCLN, and DCLK as well as other NASDAQ stocks. I would not over look New York Stock Exchange stocks, although many do. I would be looking at: MO, PFE, CAT, GE, GM, TYC, MRK, MOT, and others as well. Keep in mind, I am not recommending any of these stocks specifically for you to buy or trade. I am merely trying to give you an example of what a basket may look like. You have to decide yourself what stocks you would add to you your basket based on your own knowledge gained through experience and research on each stock.
I think every trader should have a basket of stocks he or she follows and trades. Day trading without your own basket raises the risk level and puts you in a position where you are always looking for something to trade. On slow days where the market is just not offering up much in the way of trading opportunities, you may have a tendency to jump on stocks, that under different circumstances, you would have passed on. Having your own basket of stocks will lower your exposure to risk. They may not move any better under slow market conditions, but at least you will have some knowledge of how they move.
In Part II I will tell you about a special trading basket technique I used during the early boom days of day trading. It may still be a valid concept today.
About the Author
Floyd Snyder has been trading and investing in the stock market for three decades. He was on the forefront of the day trading craze that swept the nation back in the late1990's both as a trader and as the moderator of one of the Internet's largest real time trading rooms. He is the owner of http://www.TraderAide.com , Strictly Business Magazine at http://www.sbmag.org www.FrameHouseGallery.com and www.EducationResourcesNetwork.com
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Facebook flop hurts small investors' trust in stocksReutersBy Jed Horowitz and Olivia Oran | NEW YORK (Reuters) - Just when brokers thought Mom-and-Pop investors were getting excited about the stock market, along came Facebook. The 17 percent plunge in Facebook's shares since its ballyhooed debut last Friday, ...and more » |
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COLUMN-College investing the low-risk wayReutersSo I've been employing an investment strategy to try to make up the difference so that tuition doesn't sink my kids into a loathsome amount of debt. The basis of our plan is that we invest our college funds in an age-adjusted 529 college savings plan ... |
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