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There are different theories on how to make money on Wall Street. I have found that most systems
fall into the following categories:
Faster - Momentum
Cheaper - Value
Better - Growth
More - Fed policy and money (liquidity)
Time - Cycles
Ask Yourself: What factors influence my stock market decisions? Are they relevant, or extraneous
and wasteful? What are you in the market for? Don’t automatically say “Money!!” I have seen way
too many times that people sometimes want something else from “Mr. Market”, excitement, pride,
even suffering.
Buy Low, Sell High? Only if you believe in Value theory. Otherwise use Buy High, Sell Higher using
Momentum theory.
Fed policy and money (liquidity) Interest Rate (Yield Curve) Analysis. High interest rates hurt the
market as people seek alternate investments. Remember, there are many places to put your money.
There is a lot of competition out there. Bonds might be an alternative.
Rising interest rates and rising inflation hurt stocks. Lower earnings (or profits, that dirty word) hur
stocks also. The opposite of these three help stocks.
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Don’t Mix Methods. Sell your positions for the same reason you bought it, but whatever you do,
don’t mix methods.
If you buy with Value in mind, sell with Value in mind. Do not decide that, all of a sudden,
Momentum will work now. The only exception that I can think of is to use Cycles of Time to help
better time your entrance and exit.
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When to use market orders. This depends if the market is in an uptrend or downtrend, and if you are
buying or selling
(Mkt is a Market order, buy or sell immediately; GTC is a Good-Till-Cancelled order):
Buy Sell
Mkt GTC in Uptrend
GTC Mkt in Downtrend
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Use Invest% to buy low and sell high. That’s what we try to do in investing, right? Only sometimes,
see Value theory above.
Invest% will give you a “factor” to use to help you determine how much to invest that month. This
works best with some kind of systematic investment program. It accentuates Dollar Cost Averaging,
since you buy more (in absolute dollar terms) as the price goes down, and buy less (in absolute dollar
terms) as the price goes up. Since you are varying your purchase amounts you need to have a
cushion, because some months you will buy more.
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More will be added at a later date. Any immediate questions can be answered by doing a basic web
search. Besides, you might find something interesting yourself.
Marketing Concepts
Faster - Time
Cheaper - Money
Better - Quality
More - Quantity
Service/Discipline