re: blueballs Congratulations ... rarely have I read such a good...

re: blueballs Congratulations ... rarely have I read such a good post.

I would just suggest a few other trading tools that I use.
Sometimes I may buy a spec but limit myself to less than 5% of my portfolio on any spec. Regardless of how I feel ... how strongly I might believe in the company ...
that way if it goes down by 20% ... by risking only 5% of total capital the loss is only 1% of the lot.

Holders of LUM would appear to have invested a large percentage of their free capital ... hence the pain. For that I am very sorry.

I believe a combination of both fundamental analysis as well as technical is the key. If the books don't make sense or if the cashflows that are expected don't come in I am quick to abandon a spec stock. Stop loss is also very important ... if I buy a stock for 60 cents and it falls to 50 ... I take the medicine and move on.

Personally beleive their is no need to invest in highly spec stocks very much .... yes the returns if you get it right can be substantial ... however so are the risks.
Sometimes sure we see stocks fly from 10 cents to $2.00 ... but this is rare. HDR a current HC favourite .... and yes I hold it ... has risen from around 50 cents 12 months ago to $1.40 at present. Great return ... however looking at a company with a similar return but for far less risk SFE ... Sydney Futures Exchange went from $2.25 to $5.40 ...CTX Caltex from $1.98 to $5.95 ... others with lesser but still 50% plus yearly returns have been CEY,COA,ABB,MBL,PBL,GRD ... just to name a few .... the difference between these and spec stocks is that they have an established business and as you would put it the car has no rust ... so the real risk of downside is limited to some extent.

One thing that will make us all rich if we can do it is to remember ... if you just get a 25% return each and every year after 20 years you will have 86 times what you invested !!! We all seem to want to get rich quick ... myself included ... however it is not a reality. Discipline is needed. I personally cannot stress this last one enough. If you are loosing ...stop loss ... don't double up ... sometimes it doesn't work ... sure sometimes it does ... but if you have overinvested to start with in a company ... you can be making a life changing decision by doubling up !!!!

Recently went to the casino ... I like blackjack and have played for many years .... casinos will always win in the end ... however playing perfect blackjack reduces the odds to the house only having a 1.5% margin over you ...(no counting naughty boys) anyhow ... the only table you can get on easily is a $25- table .... to survive any bad run I beleive you need 80 to 100 times your bet size when you walk in ...
not many people are prepared to have 2-2.5k in their pocket when they walk in ... without it ... well you are more at the mercy of the casino ... have a bad run a bad shoe loose 10 hands in a shoes and your bank is only $500- .... you are down 50% ... same with trading
without discipline you have no chance ... loose 50% of your free capital on one trade and it is very very hard to make it up. Money Management . As I said for spec stocks absolute maximum 5%, rising to 7% for good small caps paying a div and profitable up to 12 % absolute max for a large cap stock making money.

Sorry have rambled on as I usually do

In summary for me
1\ Fundamental anaysis
2\ Technical analysis ... follow the trend
3\ Stop loss
4\ Money management ... size of investment according to risk
5\ stop loss
6\ stop loss

Thanks again for your post Blueballs
Sorry to have rambled On

HMM stocks mentioned .... I hold a direct or indirect finacial interest in ABB,GRD,MBL,HDR,PBL