Short Interest Warning. Many investors either don't care about short interest, or care too much. What the vast majority don't understand is there can be a hidden landmines in the data.

The superficial theory is that a large short interest may have to be liquidated some day, and that will drive up the stock significantly if it happens. Recently, several stocks did just that, as investors "forced" it to happen. Also, many investors see a significant short interest in the stock and assume that there are investors lurking around the stock trying to drive the stock down or at least hoping that it will go down. And that can happen.

But most of the time neither of the above is true, nor will it be. Why? There are two major other reasons for short interest, neither of which contribute to the above scenarios.

First, companies that have convertible bonds outstanding will also have a significant short position existing. And this short position will never have to be covered, nor will it necessarily result in open market purchases of the stock that would drive the stock up. The holders of the bonds also hold the short positions. They cover the stock that is due on the short position by converting the bonds into stock, and they use those shares to pay off the short shares owed. The short position disappears, with no direct impact on the open market price.

Why do convertible bond holders have short positions? When they supply the convertible debt (let's say $100 million at a 5% interest rate -- for a $5 million a year interest payment), they do not want to put up the full $100 million, and they want better than a 5% yield. So they short the stock by selling it at the same time! Let's say they sell $50 million of stock and use the proceeds towards the $100 million they are giving the company. So their net investment is only $50 million, and they are earning $5 million a year on that, or the equivalent of a 10% return. Ahh, but you are going to say that they will have to pay interest for "borrowing" the stock they sell. Assuming for the moment that they have to, their borrowing cost should be really low because they have access to stock to cover ("collateral" in the converible bonds)and that stock is derisked if the price goes higher than the conversion rate (the real risk of a short position). Net, net they still make out enough to want to short stock when the company issues convertible debt.

In fact, they may not need to borrow from someone else, because they can convert the stock (at whatever conversion rate) to supply the stock, if it is needed. A number of factors then come into play (conversion rate vs. current stock price, a contingency for borrowing a small portion if suituations change, ability to short more if the stock price rises closer to the conversion rate, or goes over, etc.) I am not an expert, so can't estimate exactly how much stock is shorted, but you can see the short positions go up when convertible debt is issued by a company. In this case the issuer of the convertible bonds (the company) is the "evil doer" because they trigger the initial short selling that hampers their stock price.

The second reason short positions may exist without necessarily being associated with "evil shorts" is due to the options market. Options market makers must take a short position when someonee buys more puts. If someone is buying and selling puts as a "trade", then yes, there would be an impact on the stock prices as market makers have to adjust their short positions. The effect can be muted, however, by buyers who buy one put and sell another lower-priced put against it, significantly reducing the need for the market maker to actually sell shares short.


More importantly, a lot of puts are initiated by existing owners of the stock who are simply hedging their positions for a period of time. This may cause the market makers to short the stock (perhaps not 100%, depending on strike prices and duration, or even alternatively taking out a semi-balancing put, or selling some calls, etc.). If they do short the stock, the short sale position is a one-time event randomly selected by the owner of the stock. The duration may vary depending on circumstances, so the short position will be retained until that point (i.e., no immediate "squeeze" will take place because they won't be forced out of their position until expiration day, or the original client changes their mind and sells back the put).

Their puts may also be closed out at expiration by the owner of the stock giving up their stock at expiration (as required by the put if it is not closed out before expiration!). If so, the options maker doesn't have to buy stock on the open market to cover the short -- they have the stock from the original owner of the hedged put.

These are just some thoughts to help realize that short positions are not always intended to drive down the price of a stock, nor can they always be squeezed out, nor can a price increase be easily achieved for some shorted stocks by attempting to squeeze them out. YMMV

Let me start a conversation again:

Watch the Fed.
Careful of Market Orders.
Cut your losses early.
Live to fight another day.
With all the charts and Indicators, Trade Price is the Most Basic.
Not making a trade is a Action.
JMHO

Let your Winners RUN, like AAPL from $5.00 yrs ago......

Hawk

No, it’s really hard, I haven’t moved beyond the angle of the newcomers yet, but already tired :D

Good day to all. A very interesting board, but the navigation is extremely unusual, I have not seen one like this, from 2005-2006, I like it! ;)

I happen to be a newbie, no surprise
Is it me or does it seem hard for newbies like me to navigate on the board?

Are you a millionaire?))

As you know...most Fail.
Diversify a bit.

Hawk

I'm new, as of today, to this forum. I have been on the internet since just about the beginning but have not learned a lot of what is going on now. If somebody wants to tell me something, I will be glad to listen to them. In particular, I want to clear doubts related to small-scale business.

I guess I am beginning to find my way around. Thanks buddy.

BigD

First, watch, read, learn.
Use real $$, but very small to start.
Needs to be real to have skin in the game....it matters than.
Look around the stes here and find people to pay attention to.
GL

Hawk

Hello Investors,

New trader here,

Wondering where to get started, i've watched some Tim Grittani and Tim Sykes and wondering if you guys recommend any particular websties to learn and expand my knowledge.

I have Penny Stocks for Dummies, but feels like a useless book.

I have checked on stockcharts.com

I'm just overwhelmed with the whole trading experience.

I quit my high paying sales job to work from home for a few bucks an hour, and now find myself at my computer at home able to trade and watch and learn the market.

Any help would be GREATLY appretiated. I'm not sure if there is a newbies handbook on here.

Anyways, Thanks in advance,
Big D

If you have questions people will try and be of help.

Trade on......

Hawk

OH MA GODS.. Difficult to navigate your way here.
I am new to this site and it seems everything is strange. I Haven't gotten the grasp of What and how can do anything.
Any help will be appreciated.
Looking forward to share quality and valuable info with you all. Thanks

hope springs eternal for AEPP

New to iHub, I hope to learn a lot. My goal is to supplement my retirement income.

When you become a millionaire, you can have others spell it for you. :)

LOTS to larn at TECO

NEWBIES DONT TRY AND BREAK THE POOL

SEEK~ Monster News out!: Up-listing to the OTCBB.

SEEK

SEEK PROFIT

Newb here. My online trading account (ING direct)charges a "low priced security surcharge" of $0.007/share when ave execution PPS is <$1.00. Am I getting ripped or is this fundamental in all online trading accounts?

Why do OTCBB stocks shoot up sometimes 1,500% with very little volume?
This can be seen on the "Streamer" page on iHub.

If you see posters with disclaimers stating they profit from posting....RUN, RUN, RUN....AND DON'T LOOK BACK!!!

Wake up early, especially if you live in the west coast!! too many time i missed the boat because I overslept

always take profits because someone else will

Great tips!

Great info, thanks for the post!

Thanks a lot for this post it was very helpful to me as I am a fairly new trader and have yet to fully understand everything involved with trading.

Thank you for this information.
Now, I'll need to study and learn how to read and interpret charts.

You could try these older charts or the newer ones below but they are basically the same thing shown in different formats:

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=11534730

Short Term to Intermediate Indicators. It's best to be cover shorts and enter long positions on cross overs of green lines. Best to go short on cross overs of the red lines and or exit long positions.

The first set of charts for market timing the SMH are based on using the NASDAQ New Highs and similar indexes are shown here. To go long: First wait for the NASDAQ New Highs to set a new low and reverse itself from an approach of the lower Bollinger Band. To go short: Wait for the NASDAQ new highs and other similar new high indices to set a new high print at, near, or above the upper Bollinger Band. I am also now using the NASDAQ McClellan Oscillator (Ratio Adjusted) ($NAMO) to confirm the above - Overbought above 25 - Oversold below -25. These charts do not fully update until after market close.





Short Term Indicators vs. the SMH; any index can be used - The first set of short term indicators I use are based on the put to call ratio. To go long it is best to wait for the put to call ratio to close over 1.0. On the chart below the put to call ratio now updates intraday but it is not always accurate! Intraday reading of the put to call ratio can be found here updated every half hour after the open:

http://www.cboe.com/data/IntraDayVol.aspx

The more days in a row the put to call ratio prints over 1.0 this the more likely the bottom will be a strong one. The link above shows intraday readings of the P/C ratio.

Also closes on the put to call ratio below 0.50 and sometimes a bit above are indicative of a short term top. Watch the simple moving averages as well because periods of too much buying of puts or calls will almost certainly bring about market bottoms and tops respectively. On the CPC/VIX ratio; this is largely a longer term indicator where investors are likely to make more money on the long side once the short-term 21 day sma has crossed above the 200 day sma. The reverse is true as well. An investor will likely make more money on the short side when the 21 day sma crosses below the 200 day sma:





Next I use the VIX, VXO and VXN (Fear Indices) because they can help to refine decision making on tops and bottoms upon reverses from upper or lower Bollinger Bands especially when the index stretches more than 10% above or below its 10 day simple moving average. When a volatility index stretches more than 10% above or below its 10 day sma it will generally reverse direction as will the market in general in the opposite direction.





Also TRIN and TRINQ readings on the 5 and 10 day simple moving averages over 1.5 are bullish while readings below 0.85 are bearish. These readings don't happen often especially with the 10 day sma. They are also early indicators so the market can continue higher or lower for a while but they are reliable for indicating market turns that are about to take place.

Thank you for helping us newbies learn.
Please re-post an updated link for intraday readings of the P/C ratio. The original link is not working since it was posted a few years ago.
Sincerely,
Sky

excellent must read.

Yes, I thinnk I can and I really did it.

BB Stocks don't require the companies to meet set minimum assets or revenues. So in other words, they can sell gumballs but as long as they hire a good PR firm..you will never know.

You always have to ask yourself why is the company listed on the OTC or Pinks. 99% of the time it is becuase it's BS.

I've been around a while and know that any BB or Pink sheet stock never blossoms into a real company. Take that with a grain of salt.

Play the momo.

Sorry I am relatively new to BB stock. Is BB stock anyting under $1?

Thanks!

10 Winning Investment Tips



1. Don't open a trade just because it is cheap. The only reason to open a position is when the underlying security looks set up to make a decent move.

2.When you open a trade, start looking for signs that you were wrong. If you see them, then get out before your stop loss is executed.

3. Good trading should be boring, like doing the same thing over and over again. If there’s one thing I guarantee in trading, it’s that "thrill seekers" or adrenaline junkies get their accounts grounded into tiny bits and pieces.

4. Always be in control and aware of your own sea of emotions. Every trader’s downfall will come from not being able to control your emotions. If you are screaming at your computer screen, begging your stocks to move in your favor, you have to stop and ask yourself, "Is this rational?" Ease in. Ease out. Keep your stops. Don’t scream and shout.

5.The turning point of when amateur traders turn into professional traders is when they stop searching and hoping for the "next great technical indicator" and start managing their risk on each trade.

6. Trading is simple, but it isn’t easy. If you see yourself having a future in this industry, forget about "hope" and stick to your stop loss.

7. You are buying and trading on the emotions of other traders, not the actual stock. You have to be aware of the human psychology and emotions that constitute trading.

8. Always remember, trading is supposed to be a business. So treat it like one by not letting your emotions get in the way, stick to your stop loss.

9. If you come into trading with the idea of making “big money overnight,” you’re better wake up and smell the coffee. Most accounts have been blown because of this “account killer” mindset.

10. Beware of your number one enemy, yourself! If you start to get too excited, beware! As excitement clouds your judgment, it starts to increases your risk.

Cheers & Happy Trading!

Brian Lee

Call your Broker
They should have the answer for you. Always remember that they are Supposed to be Helpful and should answer all of your questions. Don't be shy to ask about Anything as it is better to ask than to find out later something that could have saved you money. If they do not have stop loss orders then see if they have If/Then orders, where If the price drops to a certain level Then a Sell order would trigger. If it is a full commission broker that you talk to on a regular basis they can often add your symbol to their watchlist and keep you informed. If you deal with a Team or discount broker then call often and get familiar with the brokers there. You might find a friendly person to talk to on the phone or at your local office. Remember that the Brokers are there to help and offer assistance. If you have a good one they will be more than happy to assist you in any way that they can.
I hope that this Helps
Have a Wonderful Week!
Sincerely, Bob :^)

question: Can you put a stop loss on a mutual fund?

gramps, could you change frcd.ob to syni.ob thankyou, hard to get any interest when investors don't know where to go.

http://biz.yahoo.com/iw/060223/0110867.html

Thanks everybody, 1 more thing

I sure appreciate you guys givin it up for me you are a big help. I will be looking into all your suggestions. I do have one more question as long as we are all here,I know I need to put myself through some more chart schooling and I'm workin on it. One question is which do you prefer Big Charts.com or Stock Charts.com or something else. I would imagine one would want to sign up for one of these right? When screening stocks do you use a program like TC 2000 or do you do your screens somewhere else?

Dale: One good place to start
is to read/view everything you can
from Chris Manning/IMO.
TSV is very good indic.
Many things come back to PRICE..IMO
GL with your search....simplicity
seems to work well.

Hawk

Check out Lowtrade's site. He is good with teaching the basics and likes to include company fundamentals with his picks. Not just any penny player. He is only willing to teach those that want to learn though, not just pick stocks for them.

http://www.investorshub.com/boards/board.asp?board_id=3972


Also, check out Stock Analyzer's site. Interpretation and basic TA knowledge are explained in detail in the header info. The lessons are great! Either way, both are great places and people to learn from.

http://www.investorshub.com/boards/board.asp?board_id=4084

Take Care,

COULD BE A TRAP

Thanks, I've kinda been following a few people around. But it takes a while to figure out who's blowin hot air.

Try the following for some mentoring,

Lowtrade
Ken Goodrich
Wizetrader

There are more but see how you go there

GLTY

Thanks Jagman

I don't know if you would be interested or you know of someone in Ihub that would be interested in being my GO TO GUY or not. I could sure use one. It seems to me that there are a lot of people in Ihub that are plenty sharp enough to give a hand but don't necessarily have the time or patience for a newbie, can't blame them for that. If anyone is interested drop me a line. I'm not a total moron just a dufuss sometimes.

Dale IV....here's a good place to start to find some stocks with good fundamentals....check the list once a week or so, they are results of a screener with the Motley Fool criteria:

http://www.quicken.com/investments/strategyexperts/?strongpicks=fool

I also suggest joining Clearstation....it's free and you can set up a "Recommend" portfolio to see how you do compared to others. You can also see how others are doing on their recommend list and get automatic emails from members that fit your investing style when they add/remove stocks from their list....some day trade, others buy and hold.....
and it's all free..... Their "TA" school info is fairly basic and the charts are easy to read..... The message boards are fairly unemotional and to the point...

http://clearstation.etrade.com/

I already did. Nobody did. If you look back to post #208 I threw one out. I thought milt wrote a pretty good newbie don't but he didn't tell us what we should do. I would really like someone to cut through all the BS that we are dealt on a daily basis and say, this is all you need moron, you don't need all that other crap. My dream is to one day not get up at 4 am and serve my multi milloinaire boss until 6 pm. I would much rather sit here at my computer and make my living. I kind of know where to start, I'm just looking for some clarification.


I know I spelled millionaire wrong. When I become one I'll learn how to spell it.

Just throw 1 up and see who takes a swing....


Hawk

Has Gramps moved on to the big ticker in the sky? He hasn't been on here in almost two years. Now where will I look for answers to all my stupid questions?

Newbie Do's and Dont's has big trend-following bias

Two main trading approaches are opposed to each other: 1. trend-following. 2 reversalism (which could be called "trend fighting" if in fact there are price trends at all).

When something goes up, the trend-follower buys. If it goes up more, he or she may buy more. The reversalist, on the other hand, is looking for a reversal, or a "reversion to the mean." If something goes up (to the top of its "channel") it's time to sell.

These views are basically opposed, although a trend-follower is really a LONG-TERM reversalist, simply believing in big reversals that are far apart in time. Neither one is mainly an "investor," for income, since both are speculating on price.

It seems that 70 to 90 percent of the postings on this "Newbie Do's and Dont's" board are restatements of the main rule of the trend-followers: Cut your losses soon, let your gains run. How many ways can the same point be made? (There are also some "money-management" messages.)

Is this because the trend-followers are simply right? Or is it just the bias of the board leader, and posters, towards trend-following?

Victor Niederhoffer is a reversalist author of investment books and articles. He says "The trend is not your friend." Others, like the "Turtles," were famous trend-following traders. They said "Losers average losers." Jesse Livermore (the Great) started as a reversalist in his youth, but converted to trend-following as an adult. The Dow Theory (of Dow, Hamilton, Rhea and Russell) is basically trend-following. In the "Market Wizards" books by Jack Schwager, the consensus advice is: follow trends, cut losses soon.

I'm too lazy to trade wiggles in price, as the short-term reversalist must do. To me, investment wisdom is "juncture recognition" -- recognizing the rare times, like 1929, 1974 or 2000, when there is "a turn in the tide" and bull market becomes bear market or vice-versa. (That, plus stock-picking, a different skill.) I like it when laziness is a virtue.

Both approaches might work -- but not for many people. The vast majority of traders LOSE MONEY. I wonder why the people on these boards think that they will not be in that majority. On the other hand, Goldman Sachs and Lehman Brothers have trading departments that seem to make money every year.

Anyway, the extreme bias of "Newbie Do's & Dont's" towards trend-following should be noted.

So lay it on me then!

What does a newbie investor need to get going? I've been doing this for about 8 years now but only a couple of stocks a year. I'm ready for the next level. I've got the online broker, some refer to it as eturd. Do I need Mytrack? Do I need Nasdaq level II? Do I need Big charts or not really? I know I need to learn how to read charts, I'm workin on it and have learned a lot from Ihubbers, thank you all. How many indicators do you really need to use for TA? I'm not looking to daytrade so I wouldn't think I would need the full arsenal.