Last year I taught my girlfriend how to buy and sell stocks.
Since then she has developed a strategy that has made her a lot of money.
I feel kind of foolish telling you about it because it's rather crude and simple.
There are no fundamentals to look at and only minimal technical analysis involved.
All the standard ways of picking stocks don't really apply here.
The only reason I would even consider it is because I see her making 10% to 20% in a month rather routinely.
Let me outline her strategy so you can all play with it and hopefully make some money on your own.
She first starts a watch list of stocks.
In it she puts all the big companies likely to have volatility but very safe.
The list might include Apple, Microsoft, and/or Visa.
These are companies that won't go out of business and have big up and down price swings of 10% or more per week or month.
She'll also put on her watch list stocks that are currently very hot.
For example, agriculture and oil have been hot lately so she takes the leader in those industries and adds them to her watch list.
Now that her watch list is setup, she uses Yahoo Historical Quotes and Charts to locate a price on each stock where it faces resistance and a price on each stock where it finds support.
For example, as of this writing on August 9th, 2008 during the last two months only, Apple (AAPL) has dropped to 165 three times.
Two times it hit 180 before reversing.
It sits today at 169.
55 after bouncing off its latest bottom of 153 and is heading towards 180.
As you see, AAPL is bouncing between 165 and 180.
She buys in at 165 and exits at 180.
Each time is almost a 10% gain.
Now here is the twist.
She doesn't buy the stock for a 10% gain, she buys a Call option on the way up and a Put option on the way down.
She only uses the stock price to tell her when to get in and out of her respective options.
With an option you can supercharge your return and make two to ten times more profit.
If the trade goes wrong, she has a strange stock trading strategy that seems to work in this market.
I normally cut my losses but she actually buys more on the way down.
This gives her a lower average cost per contract.
Now she just waits for the stock to make its bounce.
Since she has a lower average cost the stock doesn't have to bounce all the way back to 180 (as in our example) for her to make a profit.
The majority of the time that bounce does come and she has very few losers.
The reason the bounce comes is in the selection of the stocks.
These are all major companies who do face some bad news or tough times that drag them down.
However, Mutual Funds will always step in and buy them if the price gets low enough.
Our economic times are very uncertain in 2008.
We have a presidential election coming, price of oil is going up and down, the economy is in a downward spiral and no one knows when the good news will come.
This is the perfect environment to do this type of active trading as opposed to buying and holding.
Don't miss the opportunity.
Since then she has developed a strategy that has made her a lot of money.
I feel kind of foolish telling you about it because it's rather crude and simple.
There are no fundamentals to look at and only minimal technical analysis involved.
All the standard ways of picking stocks don't really apply here.
The only reason I would even consider it is because I see her making 10% to 20% in a month rather routinely.
Let me outline her strategy so you can all play with it and hopefully make some money on your own.
She first starts a watch list of stocks.
In it she puts all the big companies likely to have volatility but very safe.
The list might include Apple, Microsoft, and/or Visa.
These are companies that won't go out of business and have big up and down price swings of 10% or more per week or month.
She'll also put on her watch list stocks that are currently very hot.
For example, agriculture and oil have been hot lately so she takes the leader in those industries and adds them to her watch list.
Now that her watch list is setup, she uses Yahoo Historical Quotes and Charts to locate a price on each stock where it faces resistance and a price on each stock where it finds support.
For example, as of this writing on August 9th, 2008 during the last two months only, Apple (AAPL) has dropped to 165 three times.
Two times it hit 180 before reversing.
It sits today at 169.
55 after bouncing off its latest bottom of 153 and is heading towards 180.
As you see, AAPL is bouncing between 165 and 180.
She buys in at 165 and exits at 180.
Each time is almost a 10% gain.
Now here is the twist.
She doesn't buy the stock for a 10% gain, she buys a Call option on the way up and a Put option on the way down.
She only uses the stock price to tell her when to get in and out of her respective options.
With an option you can supercharge your return and make two to ten times more profit.
If the trade goes wrong, she has a strange stock trading strategy that seems to work in this market.
I normally cut my losses but she actually buys more on the way down.
This gives her a lower average cost per contract.
Now she just waits for the stock to make its bounce.
Since she has a lower average cost the stock doesn't have to bounce all the way back to 180 (as in our example) for her to make a profit.
The majority of the time that bounce does come and she has very few losers.
The reason the bounce comes is in the selection of the stocks.
These are all major companies who do face some bad news or tough times that drag them down.
However, Mutual Funds will always step in and buy them if the price gets low enough.
Our economic times are very uncertain in 2008.
We have a presidential election coming, price of oil is going up and down, the economy is in a downward spiral and no one knows when the good news will come.
This is the perfect environment to do this type of active trading as opposed to buying and holding.
Don't miss the opportunity.