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A Major Trading Campaign

You're interested in doubling or tripling your portfolio in a very short time. The good news is that there are lots of opportunities in the stock market to do so. The bad news is that you can also lose a lot of money very quickly trying.

The notion of get-rich-quick is anathema to many experienced investors. They rightly point out that such dreams usually come to nothing and novice investors are just asking for trouble putting a large percentage of their capital in one highly speculative issue. We're going to ameliorate the risk with a few common sense strategies, but I don't want to discount the danger you are entering adopting such as a strategy.

Now we've clearly identified the risk, let's define what we mean by a major campaign. You are going to risk a significant percentage of your capital over a time period of from 1 day to 3 months on a high flyer in the expectation of a 50% or more capital gain. Here are the survival rules.

1. Determine if this kind of investing is for you.

"Know thyself" is one of the best trading skills you can develop. Are you more comfortable day trading or adopting long term positions? Do you have the stamina to ride out 20% corrections and buy more? Be honest with yourself. Do you?

These kind of issues don't come along all that often, so make sure you preserve your capital on the ones which don't pan out.

Typically, I go 3-4 months between winners, making and losing a little here and there before finding another good one. Don't invest money you can't afford to lose and NEVER use margin.

2. Learn to read the tape.

This can not be emphasized enough. Find a book on technical trading and learn the signs when a stock is ready to go (spike up on strong volume, former resistance point becomes a support point). Also, learn when a stock is done (large up thrust after bull move on huge volume followed by a rapid retreat).

Stocks making major moves don't go up all at once. They advance, establish new support levels and move again. Look for new solid support levels to add to positions. I don't usually try to sell the minor spikes and buy back later, mostly because of limitations of my broker. Finding the right exit point is very difficult.

3. Identify your issues.

Now the fun part. I look for fairly new companies in high growth areas in which the potential is completely unknown. I also look for a good story angle. Scan the chat sites and do own your homework. You can also be a contrarian at times.

An adjunct to this is to identify savvy operators on the chat sites who always seem to have good ideas. Find a guru or gurus who speak good sense to you. Be a fully participating member on a chat site and don't be afraid to ask questions.

4. Avoid OTC-BB stocks.

Trust me on this one. You can make lots of money on fully reporting companies.

Also, avoid IPO's (Initial Public Offerings) 99% of the time.

Buying IPO's on the open market is nearly always a loser's game , but if you're prepared to be very quick, you can make a lot of money at the right time. I never touch IPO's except when the following 4 conditions are met.

a.) Strong company with a good product.

b.) Another IPO on the same day is getting most of the buzz.

c.) All IPO's having a few bad days (IPO fever runs in cycles).

c. ) Markets as a whole are tanking badly.

When these conditions are met, you can load up on the market turn and within a day or so hopefully realize a whopping gain.

5. Establish positions appropriate to the issue.

By this, I mean don't buy 20000 shares of a stock which has a daily average volume of 10000 shares. You want to get in and out without pushing the price around. I use a rule of thumb of having no more position than 5% of average daily volume, and I also shy away from stocks having less than 200000 shares average daily volume. I like to see an active tape on any issue I'm in.

6. Don't risk all your capital at once, taking small positions at first and adding on strength. This is the key step. Minimize your downside risk by slowly adding to a winning position until you have all your shares. Never buy more of a stock if it initially goes down (this is a good rule for all investment strategies), in fact, if it initially doesn't work out, get rid of it before you lose 10%.

7. Cut your losers short, let your winners run.

Again, limit yourself to a 10% maximum loss. Be ruthless in determining if a campaign isn't working and don't be afraid to get out with a modest profit. If it runs again later, that's life. Look for continuing good volume as your hold sign. If a stock goes up and then the volume drops back to normal levels and the stock starts drifting lower, get out.

8. Ignore the market as a whole.

These flyers develop their own light and heat. If you find yourself saying "It'll recover when the markets turn", it's time to get out.

9. After you have taken your profits, don't look back.

When to get out is a big problem. There's no hard and fast rule. You'll never buy at the bottom or sell at the top. Stocks which you sold for a 3 point profit soar a few minutes later. A stock you aborted a campaign on takes off a month later. It's all part of the game. If you make 100% or so on an issue, don't regret another 50%.

10. Only run one campaign at a time.

This seemingly simple directive is partly a reminder to myself on the dangers of taking on clients. I ran a major campaign on a particular issue for both myself and a client and ended up botching it for myself. A good general only tries to win one battle at a time. You do the same.

11. After conclusion of a campaign, take some time off.

The easiest time to lose money is just after you've made a lot of it. Don't let your success make you feel invulnerable.

12. Share your good fortune with others and if you get stressed worrying about your stocks, then don't do it. Money isn't everything and it's far better to enjoy life.

Well, that's pretty well it. Find good stocks in hot sectors, buy a little at first, add on strength, ride them until they die.