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Attitude-with Stocks-play my game or else!
By fred | April 28, 2008
Fellow BLOG buddies – I remember years ago chasing stocks. Never did I do it right, seems I always got screwed using open orders, what is called a ‘market’ order. The stock would not move much, for instance it the price would be between $8.00 per share and $8.10, I would figure it was safe to put in a ‘market order’ – BAM – it would excute at $8.25 or $8.50 – I would get screwed for a big premium over what I wanted to pay for the stock. I may be over stating it — still I always seemed to overpay, seldom seemed to get in at the lower end.
Made me mad as hell, so one day I said ‘to heck with it!’ I got stubborn and never again entered an order with my broker that was not a ‘limit’ order. I determined what I wanted to pay and entered that amount — period. Sometimes it took a week to get my price but normally I would get it –say – 8 out of 10 times I got my price. Yes, once in awhile a stock would take off, I would have been glad to have paid a bit more and owned the stock. However, to make money on the stock market you can’t cry about one deal out of ten or twenty that you ‘SHOULDA’ had, you could also have lost the profit you would make on that one stock on the ten or twenty stocks you overpaid for.
To be successful in the stock market you MUST be extemely disaplined. You MUST determine what you are going to buy or sell a stock for, if you have a good stock with decent movement and set realistic expectations for profit you will win - if – you use ‘limit’ orders only. You are telling your broker, that you make the rules, you will not let the market or some hot shot juggling the market dictate to you. This needs patience, it needs guts, and it needs nerves of steel, however it will pay off.
For a newbie in the market, if you don’t know what a ‘limit’ order is you better ask me to send you my book ‘Making money is simple – just boring’ I am giving it out free via an insert just sign in as a member of this BLOG and I will send it to you as an insert in a e-mail. A ‘limit’ order it where you tell your stock broker that you wish to sell or buy a stock at a price you pre determine. For instance if you want to buy a stock at say $5.00 a share, and the market price is over that at say $5.10 your broker cannot buy the stock for you until the price drops to $5.00 “OR LOWER.” Also if you wish to sell a stock at say $5.00 but the market price is only $4.50 your broker cannot sell the stock until the price raises to $5.00 or higher.
To use only ‘limit’ orders is the smartest decision I ever made years ago, that is why I have advocated it in my book. The only time I ever use a ‘market’ order is when I figure a stock is going to tank, dive further and further down and I see my money going down a dark hole, THEN I will put in a ‘market’ order as I want the sale to be NOW, not later when the stock has dropped more. Over the years I have only used a market order a couple of times to salvage whatever I could get from a bad buying decision. Yes, your old Uncle could make a boo boo now and then also.
Just wanted to discuss the why’s of limit and market orders a bit. All the best, Uncle Fred
PS If any of you have a subject you would like your old uncle to yak away about let me know.
Topics: In The Markets | No Comments »