Trading vs. Investing

[Update: Since posting this article, the stock I picked (VII) as very likely to pop 20%+ did in fact pop 60% overnight. And, as predicted in this article, it immidiately fell back down. Both my entrance strategy of buying near .35 and my exit strategy of acting immidiately on any pops over 20% worked again with this ticker. So add the action of Friday, Feb 15/16 to the data pool to support my VII trading strategy further.]

Hi everyone, thanks for taking a peek at this blog. I hope that people who read this blog are able to better understand the market, and maybe pick up a few profitable tips while they learn. For my credentials, I have a degree in Economics and Business, with emphases in Econometrics, Strategic Management and Industrial Organization. I am also co-Manager and co-Owner of MIR LLC, a highly leveraged LLC that creates revenue through intraday scalping, overnight swing trading, shorting, and other forms of high risk, short term trading.

More then likely you linked here from one of my posts on StockTwits (ST). I use ST to gather basic information, and to find stocks to look deeper into. Sort of a first stop on the “Due Diligence Tour.” I have also shared many trading ideas on ST. However, the character limit prevents people from explaining their ideas. In true “Give a man a fish vs. Teach a man to fish” form, I realized that in order to really help people become better traders it is inefficient to simply make a 30 word post on ST. To really help people learn how to analyze the market a little deeper I needed a way to give my posts context. That is what I will be using this blog for: to expand on trading ideas I mention on ST.

I like to trade for short periods of time. I typically do not invest in companies. What’s the difference between trading and investing? Investors are in it for the long haul. They care about the company, the bottom line, and ignore the short term swings. Traders don’t care about the direction a stock is heading. Nor do they put as much weight on company metrics when they trade.

A lot of trading is noticing patterns, moving in to capture the upside, and then getting out before the cycle completes. Because of this, one of my most successful strategies is to trade companies that I am very familiar with. I have a collection of stocks that I have been watching on a daily basis, some of which I have been watching for more then 10 years. These stocks are typically very high volatility stocks and/or have a low volume float–meaning that there are not many shares out there for people to buy. Stocks that fall into this category can have pretty consistent patterns, and wild swings. I’m sure over time I will get into most of the stocks on my watch lists. But a few notable ones that are constantly in play include: AKTX, CHFS, DRYS, FTFT, ICON, LMFA, NBEV, MOSY, SORL, VII, etc.

For example, look at the 1 year chart for VII. (Chart from http://www.nasdaq.com)

Screen Shot 2018-01-18 at 9.32.16 AM

It consistently dips and pops by at least 20%. It has done so more then 10 times this last year, April, 3 times in May, June, August, October, November, and Twice in December.

The other clear thing I see in that chart is that .35-.40 is the established base for this stock. As it sits in the .40 area longer it builds up more and more pent up demand, and I start to get excited as a trader. Why? History repeats! Try to find a two week period on the VII chart where the stock stays stable after it hits .40. You’ll have a hard time.

When trading stocks like VII, it is incredibly important to pay attention to the day to day, and even hour to hour moves. Looking closer at the chart, you notice that the spikes in VII don’t last more then a trading day, and typically they don’t even last the whole trading day. When the stock pops, you have to be ready to get out. This means setting alerts, or being vigilant to the point of obsessive about checking the price movement. Some people like to set Limit orders at higher price targets. Thats a fine strategy, but I like to play it by ear when I see the stock run. But if I am going to be on a plane or at a meeting, then a Limit order to sell wouldn’t be a terrible idea.

There are many many ways to short term trade successfully, and I will cover my favorites over time here. Among many other things, I’ll talk about identifying a “Bullish Expansion” as it is happening, how to play a biopharma stock with an upcoming panel advisory meeting or PDUFA date, how to short an overbought stock, and how to identify a volume play for an intraday scalp. I will also talk about econometric modeling, the stats I collect, and how to determine that the models are accurate predictors of future stock price movement.

I am really excited to be sharing these ideas, and to be further integrating into an online community of like-minded people. I am especially looking forward to any debates that start here, so that I too can improve and learn more about how I make my living.

Thanks again for joining me.

You can subscribe to LIVE Stock Alerts ($9/month), 1 on 1 Chat ($6/month), and/or Early Access to my articles ($3/month) by emailing theblackinkeconomist@gmail.com to inquire!  I use the Remind platform to send alerts, which you don’t need anything other then a phone number to receive!

Disclaimer: Nothing I ever say should be taken as investment advice.  Everything is my own opinion, and I have some highly questionable opinions.  For example I would totally live in a tree house if my wife let me.  What I am trying to say here is, don’t make any trades because of something I wrote.  Do your own DD and make your own decisions.  Good Luck!

When you do things right, people won’t be sure you’ve done anything at all. — Matt Groening

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