Session 03/09/2007

[rickjust]

  However I find this group seems to have a real problem holding cash, for me cash is a position and sometime the best position to have in time or sloppy markets, otherwise you start pushing it and day trading.
have a great weekend, talk to you later
Quasi

hi,
i think that is the biggest problem here and anywhere around the world where people trade. the inability to be cashed out and sit on the sidelines .it is the ability to be able to open the computer and have`access to trading immediately without having to call brokers and check stock prices in the newspaper at the end of the day.
it is all done in an instant. no waiting. the temptation to trade is strong when you can see the intra day ticks or end of day charts , where news and blogs and stock sites are all available 24/7.
there is a lot of discussion here about direction and how to go about turning $15 into $150, all the while still trying to buy and sell stocks. best, imho to stop trading sit back and watch and wait for the right opportunity . decide on the direction you want to take . after all , one doesn't just start driving south to a destination and then decide to look at the map while behind the wheel.  this is not a criticism of David. after all 3sof is up 47% since inception which is not too shabby.
    my criticism of David would be that he is too concerned with too many things at once. and too nice .
here is what i mean.
it is hard enough to achieve the goal of 15 to 150 but to add pressure of looking back to the members to see if they made the entries and exits is too tough. it is like you are running a race but stopping to wait  and let everyone catch up. you are trying to do it for us. and that won't work . this is a public portfolio and a free site.
you are better off being the example and going ahead and buying and selling when you see fit, still sending the emails. one of the reasons you don't need to be concerned is there is always time for members to get into that trade. i noticed myself that i could leave it alone and enter the next day and get a better or same entry .
that is the beauty of the market and life in general . it is impossible to miss out.
David your goal is to turn 15 to 150 . i believe you can do it . but i believe the decision is a solitary one.
thanks,
maxi,
p.s. nothing you do here has any effect on reality whatsoever so be Happy in the knowledge that nothing can really go wrong.
maxi

[colorado-cece]

Loved your message Quasi.  Well written, well thought out.  It's what I'm here on this board to do...read sound advice from educated people, learn, and make an attainable profit.

[ScottishTrader]

Haha brilliant Quasi!!  I have to agree, I think that the original formula for this portfolio was spot on.  Using the community for "on fire" stock picking to pass on to David for a quick but deeper analysis and decision to include it in the portfolio.  (by the way, the videos were great, what happened to them?  were they too time consuming to make, or was there too many problems with hosting them?) What worked so well with this was that one person simply cannot have their eyes on so many stocks, but a whole community can have their eyes on a lot more.  What we want is stocks that are on fire! Right now!  If you look back at the trades on this portfolio, most of the big gainers were held for a very short amount of time:

EXCS.OB In: 1/19, Out: 1/22 - Gain 37%
AAGH.OB In: 1/22, Out: 1/23 - Gain 40%
OFI          In: 1/25, Out: 1/30 - Gain 37%

CPNE was held for longer, and came out with a very decent gain, but was also included in the main portfolio, and David rightly believed that there was "more in the tank", which encouraged him to hold on to it.

Also, most of the losing/breakeven trades early on were held for a few days at most, on the basis of "this isn't on fire so lets ditch it".  This left the portfolio open to pick up new ones.  I think the difficulty came in when  CPNE, PFSW and ETLT.OB were held for most of February.  CPNE was a big winner, but the other two didn't perform as was anticipated, and so were effectively "dead money" for the whole month.  This led the board to become more of a general daily stock discussion forum, as David had made it clear that he did not intend to buy or sell any stocks that day.

What I would like to see this portfolio be is as its name implies, an "on fire" portfolio that aims to capture short term moves and then get onto the next one, as they are happening in the market all the time, bull or bear.  Aim to completed within a few days to a week or so, as very often, after the fire, profit taking kicks in.  If the stock moves into consolidation, we don't want it.  If it then breaks out of that consolidation, we have the eyes of the community to bring it back to attention and jump back on it for a bit more.  Also,  I agree with you rickjust, and I think that cash is king.  If we aim to have 2 of the 3 positions invested at any one time, it means that if that one golden opportunity comes up, we are able to take advantage of it, and don't have to hesitate around which position to liquidate to get in on it.  Finally, an agressive profit protection strategy with "on fire" stocks seems important too.  Say, if we are up over 10% on a position, implement a 50 or 75% profit protection strategy and a strict overall stop-loss strategy on all positions (I just realised I've been saying "we" a lot here.  I mean David, of course, as he is the decision maker for the portfolio, but "we" as the rest of this community in terms of contributing stocks and ideas, and also following the picks).

I think the portfolio should be open to pennies (OB stocks, not pinks), provided they have significant $ volume,  as they have the potential to make huge short term gains, and that intraday trades are crucial to its operation and success.  This does mean that most of us who are not able to monitor it all day, every day, may miss out on some trades.  But the trading pattern of holding for a few days to a week should mean that there will be others coming along soon enough that we can join in on.  This is expressly a counter to the main portfolio, which is looking for medium to long term holdings that should outperform the market, and probably stocks in the main and on fire portfolios would not be the same as they are bought for very different resons, purposes and outcomes.  (well, the purpose and hopefully outcome is always making money, but you know what I mean).

Finally, I don't think options should be included in the portfolio, as they really are too volatile and introduce huge risk, even on small positions, and bring up a whole other world of issues in terms of what affects option prices that may be outside the scope of most traders' knowledge here.  Also a lot of members can't trade options, and while the option moves may be impressive, the fact that we are using options to gain leverage means the stock is not as "on fire" as we would like, otherwise we'd be buying the stock instead.  Shorts could be included, but only if they meet the "on fire" conditions in reverse - e.g. the stock broke major support and is getting killed so is ripe for a good short play.  Really, though, I think if the market turns bearish, the "on fire" portfolio should just move to cash and look for those occasional runners - i.e. not use it to play the market (which presumably is what the main portfolio is for).

David, if you read this, please don't take any of it as a criticism of what you have been doing here so far.  It is simply how I could see this portfolio returning the kind of gains that you initially set out for, and I think, is more in line with what you originally set out to do with this portfolio. As always, I am very impressed with your analysis, insight and decision making skills in managing this portfolio so far.  However, I also know, as you have said many times before, that you are not a fan of this short term trading style, and believe it is a loser in the long run.  But with more than a 50% gain in less than 2 months, no-one can say you have not done exceptionally well with it to date, and I do believe that with the help of everyone here in terms of contributing ideas, we could rapidly increase this portfolio's value. 

What I think the community needs from you (and has received, but maybe it needs to be re-iterated, daily) is a clear definition of what you are looking for in terms of stock suggestions - maybe as the first post of each day's thread as a reminder, so people don't use up your time suggesting stocks that they are interested in but are clearly not on fire.  But it is also clear that the community likes to have an ongoing discussion board where we can interact with each other and with you during market hours, and this has proven very fruitful for all involved.  The tricky thing is that these two have both been blurred into one.  I don't know whether it would work to have two intraday boards, one for stocks on fire suggestions and analysis and one for more general discussion of ongoing things.  Maybe it would be too much for you and us to keep up with 2 boards during the day - often its hard enough just to keep up with one!!  Anyway, all of this is just my (long winded) thoughts and suggestions.  As you know, I will happily support what ever decision you make in how you want to take this and do my best to get involved as much as I can.  Thanks again for providing this excellent forum for all of us!

ST

[eggman11]

Short term trading will not make a person wealthy. You will have pockets of success,but ususally you will give all the money back. I believe the best startegy is divide the money between 2 to 3 stocks with outstanding fundamentals and the potential for mutilple bags or maybe to satisfy the short termers put 2/3 into medium-long term companies with spectacular potenial and put 1/3 into short term. No offense to David, But it would be almost impossible to keep making 50% every 2 months and we won't be able to turn $15,000 to $150,000 in a year, that is a very unrealistic goal. Plus it would involve riskier trades. I believe the goal should be more over 3 years which would still be a phenominal. All the short term traders that I know, have lost money over the longer term, (one guy was up as high as 500% within 8 months and gave it all back) they eventually went bust or changed their startegy. David,  from your previous posts and experience you know the short term trading game is not a way to grow rich over time. I do believe diversification is a little overated. It better to concentrate on 3 stocks with enormous potential and make changes as warranted. (Never all in one stock, because you never know what could happen). It is a lot easier to find 1 stock that could double, than try to find 7 stocks in a row (without a loss) and make 10% on each one. Everybody just needs to be patient.

The two richest men in the whole world - Bill Gates and Warren Buffet a $100 billion between them are both long term holders, not to mention some of the other in the top 20. Look at them the 2 Google guys, the 4 Walmart heirs. in I didn't see any short term traders on the billionaires list.

[tokyopua]

Short term trading will not make a person wealthy. You will have pockets of success,but ususally you will give all the money back. I believe the best startegy is divide the money between 2 to 3 stocks with outstanding fundamentals and the potential for mutilple bags or maybe to satisfy the short termers put 2/3 into medium-long term companies with spectacular potenial and put 1/3 into short term. No offense to David, But it would be almost impossible to keep making 50% every 2 months and we won't be able to turn $15,000 to $150,000 in a year, that is a very unrealistic goal. Plus it would involve riskier trades. I believe the goal should be more over 3 years which would still be a phenominal. All the short term traders that I know, have lost money over the longer term, (one guy was up as high as 500% within 8 months and gave it all back) they eventually went bust or changed their startegy. David,  from your previous posts and experience you know the short term trading game is not a way to grow rich over time. I do believe diversification is a little overated. It better to concentrate on 3 stocks with enormous potential and make changes as warranted. (Never all in one stock, because you never know what could happen). It is a lot easier to find 1 stock that could double, than try to find 7 stocks in a row (without a loss) and make 10% on each one. Everybody just needs to be patient.

The two richest men in the whole world - Bill Gates and Warren Buffet a $100 billion between them are both long term holders, not to mention some of the other in the top 20. Look at them the 2 Google guys, the 4 Walmart heirs. in I didn't see any short term traders on the billionaires list.

Buffett is a good example, but the others like Gates et.al are people who happened to hold shares of companies they or their families formed.  So in their case the lesson to be learned is that the best way to become rich is to start a hugely succesful company and dont cash out too early. 

I am not sure how long Ichan and Soros and Kerkorian hold shares, but they were on the billionaires list, and I believe Ichan flipped his Time Warner shares recently in something like less than 6 months?

Then there is Jim Simons who is a hedge fund manager whose computers trade so frequently I have heard that sometimes they make up to 10% of the trade volume on Nasdaq.  Clearly this is a very short term approach.

Not to mention billionaire oil trader Boon Pickens.  Probably more of a mid term trader, but not as long term as Buffett.

I forget who they were now, but there were a few other hedge fund managers who I recogonized in the billionaires list.  Newly minted billionaires are the guys who started Fortress Hedge Fund.

So I am not necessarily arguing against the long term approach, but rather that it only dawned on me recently by looking at that list that while Buffett stands out as the richest, I actually dont see that many pure long term investors and there are indeed traders who are successful, they just dont get as much acclaim as Buffett.

I still like the 2 balanced portfolio approach, and David set up the capital proportions properly to limit risk anyway.   Yes, it may not be practical to keep up the fast approach goal during a correction or a bear market, but I saw nothing wrong with it while we were in bull market mode, it was fairly consistent.

[mbaugh]

David, my opinion is "if it ain't broke, don't fix it!"  When you first set out on the $15,000 fund, you started out great by letting the board submit stocks that were on fire and you did a nice job covering them.  I believe what happened was you began to get too many requests and became overwhelmed.  One suggestion I have is when someone suggests a pick, you look at it and if it doesn't look to be on fire, don't even cover it, just tell that person to submit it for review on the premium site.  I believe we were getting too many picks from non-premium members who wanted a free review of a stock and David being the nice guy he is gave them a quick review.  This took up time from picking the stocks on fire.  My suggestion is to go back to the system that worked.  On the premium site, David can pick the long-term picks and on the 3stocksonfire, we buy the stocks on fire just for short-term trades.  No wasting time on people wanting just any stock reviewed.  David will only review the ones that are on fire!  Another suggestion is we need to stay focused, quit changing methods everyday or every week.  We need to give one method at least 6 months to a year to see how it works.  Its the changing back and forth that stalls the growth.  David, please go back to the original method and we can make more trades like OFI, CPNE, etc.  Don't review every single stock just because someone wants you too, only if it appears on fire and meets the requirements.  If someone wants a review of a stock that is not on fire, well they need to become a premium member, since that's what David does and he need to be paid for it!   We need to stay focused and stick to a plan!!

[kpunarc]

david as yet is not really a long term holder in that category . the first sign of a large drop in the market and all long stocks were sold. remember these were businesses that he had done thourough dd on. and a lot of talk about strong hands and holding through technical setbacks etc. also he didn't buy these stocks with the technicals in mind so why sell on technicals if the business model hasn't changed.

David did take fundamentals into account. The technicals (and economic fundamentals) was telling him that we're at the start of a correction or a bear. Fundamentally, this meant lower trading multiples and estimate reports which in turn would effect the stock price...

...and plus...there's nothing wrong with trying out different strategies. There's no surprise to find that the gems are most always hidden among the crap. Sometimes you just have to dig to find them.

[TraderStar]

for me cash is a position and sometime the best position to have in time or sloppy markets, otherwise you start pushing it and day trading.
have a great weekend, talk to you later
Quasi

"Cash is a position" 
I nominate that for "intelligent phrase of the week" and apart from applauding you, I will post it alongside my quote that reads " If you keep RISK under control, you WILL have PROFITS!!"

Excellent