Jim:
Before I can
make everybody out
there understand
this… I need to
deconstruct it… to
take it apart… a
couple of words that
you and even I use
too often without
elaborating and
explaining what they
really indicate… and
the words are buy
and sell… do you
know those two words
mean nothing on Wall
Street…. nothing…
you will never catch
a professional
saying buy or sell…
the words are too
imprecise… look the
stock exchanges are
probably the last
places in America
where you can really
haggle over prices…
where you can
actually watch
supply and demand
set prices… when you
see a stock quote in
the paper, that is
not the stocks
price… in the same
way that $199 might
be the price for an
I-phone… no, no… it
is just the last
price that someone
paid for it… in
other words, the
close of the day, it
is the last price
that happened… 401,
we are at a
different price.
When you buy a
stock, you can call
your broker and say
I want to buy 500
shares of X… and
when I say X by the
way, I am using a
random stock, not
just US Steel… if
that is all you say,
I want to buy 500
shares of X, that is
what is called a
market order… now I
gotta tell you
something… only
suckers place market
orders… don’t be a
sucker… because you
end up buying or
selling at the
asking or bidding
price… depending on
which end of the
deal you are on… the
guy that you are
transacting with the
help of your broker,
who doesn’t want to
spend an extra few
minutes trying to
help out a small
time client… no, no
he will just take
what he wants… so
you don’t want to
buy or sell… no you
don’t want to buy or
sell calls… you
don’t want to say
that… you don’t want
to place a market
order…you got that…
I am trying to
really discourage
that.
You want to place a
limit order… limit
orders keep you in
the drivers seat…
they keep you from
being totally ripped
off… and they are
really easy to
execute.. so from
now on when you call
your broker or you
go on the internet…
just make sure you
tell them the
highest price that
you are willing to
buy at… or if you
are selling, the
lowest price that
you are willing to
sell at.. those are
the limits of a
limit order… that’s
not so hard… so what
is the problem… the
problem is that some
brokers don’t want
you to do this…
usually they don’t
want to tell you not
to use market
orders… with a limit
order your broker
knows that you
transaction might
not happen… maybe
nobody wants to buy
at the price you are
asking… no trade… no
commission… these
guys get paid on
commissions not much
else… but a market
order will always go
through right… there
is always someone
who is willing to
buy or sell at any
price… not only that
but with a market
order the brokerage
house can pair your
order with someone
else’s if they want
to and get both
commissions… likely
at a price, that
could be at a
disadvantage to you…
paying that little
extra for that
market order or
getting a little
less when you sell
with a market order…
could be the
difference between a
profit and a loss…
the difference
between staying in
the game and
throwing in the
towel and giving up
because you can’t
believe the price
that the broker
comes back with… now
the limit price is
going to be your
price. Please, if
you listen to
nothing else I say…
use limit orders
instead of market
orders… and you will
be way ahead of a
lot of the jokers
out there… there is
absolutely no
downside to limit
orders for the
trader… if
diversification is
the only free lunch…
limit orders are the
only free breakfasts
in the business….
there is a free
sausage McMuffin, if
you call that a
breakfast.
Here is the bottom
line….
▼ ▼
▼ ▼
▼
The Bottom Line!:
The best way to stay
in the game is to
make sure that no
one is taking
advantage of you…
how do you protect
yourself… use limit
orders, and you can
know that at least
your broker isn’t
cheating you.
Don’t let the
brokers take
advantage of you -
limit orders could
give you a leg up...
Make sure nobody is
taking advantage of
you…. don’t get
pantsed … get smart…
don’t use market
orders… but a limit
on them and then you
will never get
ripped off.
[verbatim recap]
▼ ▼
▼ ▼
▼
Jim went on after
this segment to take
questions from
callers, and
responded with his
comments...
``````````````````````````````````````````````````````````````````````````````````
Q:
I am retired
from Amgen, I am
on my second
career teaching
special
education, and I
need to protect
my portfolio.
What is your
advice on
trailing stop
loss, to lock in
my profits, and
I should I use
dollar or
percentage? And
part two, is
what about
trailing stop
limits to buy in
the dips?
Jim:
I am not in
favor of that,
in part because
let’s say that
the market is
down 200 and you
put a limit
order in, boom,
you get executed
and then the
market closes
down 600... the
market is way to
volatile for
that… I like to
monitor things…
I think that the
kinds of markets
that we
developed at the
beginning of
2007... have
become markets
where it is
almost
irresponsible to
use those kind
of stops… if you
can’t monitor
your stocks, the
way you buy and
sell them… I am
now actually
saying… give it
to somebody
else… put limit
orders in, yes…
if you are going
to be there… but
just don’t put
yourself at the
mercy to cancel
orders or
anything like
that… it is just
too dangerous…
this market is
just too
volatile and you
are going to end
up feeling
ripped off… and
if you end up
feeling ripped
off then you are
going to want to
not be in stocks
anymore… and
then R.J. I have
not done my job.
``````````````````````````````````````````````````````````````````````````````````
Q:
As a small
time investor, I
invest on a
monthly basis, I
invest $120 a
month and I have
done that for
three years. I
am just
wondering how do
I get my broker
to treat my
small time
investment as if
I were a
millionaire, and
how can I trust
them?
Jim:
First, I think
you are doing it
just right… you
need to know
that right up
front… second, I
like to piggy
back… let’s say
that someone you
know already has
an account with
a broker… okay…
and it is
someone
substantial… or
a group of
people using the
same broker…
they are going
to treat you
well… because
they don’t want
to have this
word of mouth
against their
whole, or a
large part of
their client
base… unless you
go online… I
like to talk to
people… well, I
don’t buy or
sell stocks
anymore… but I
liked it at the
time… except for
ActionAlertsPlus.com, my
charitable trust…
I would urge you
to be part of
another group of
people… because
otherwise you
are not going to
be treated well…
Marge, it’s a
shame… but the
industry is not
created for
someone who buys
stocks of your
size… and I know
that… if anyone
reads
Confessions of A
Street Addict,
you’ll know that
when I first
started, the
brokers laughed
at me because I
was buying in
increments of 8
and 9 shares of
stocks… and
believe me, I
came after
everyone of
those… and
everyone of
those people is
now… no, I just
took a beating
and moved on.
``````````````````````````````````````````````````````````````````````````````````
Q:
I wanted to
ask you a
question about
volume spikes.
In particular,
what I will
notice on
certain stocks
you will see a
trade at the
very last minute
of the day,
where a massive
volume of shares
will trade. I
mean, I am
talking about 10
or 12 million in
one chunk, I
used to see
something like
that on level 3
back when that
was promising.
What is
indicated when
that buyer holds
out until the
very, very last
minute of trade?
How could we
profit from
that? Is that a
vote of
confidence for
the stock?
Jim:
No, Michael,
there are two
reasons why that
often happens…
one is there is
a big batch of
market on close
orders… very
hard to try to
predict what
that will be… so
I can’t help you
make money with
that… when a
stock is out of
the S&P at the
close… if it has
a big market on
close order… it
is called mock
orders… also,
when stocks pair
off at
expiration, a
big market on
close orders…
and because of
the various
market funds,
they have market
on close orders…
they are really
hard to gain, I
don’t think you
can make a lot
of money… the
other kind of
big volume ones
are at the close
of the Nasdaq…
and there what
happens, is
someone, a
broker might be
accumulating
stock all day
and then prints
it at the last
point… it is
called printing…
or someone might
be selling all
day and trying
to disguise it
and then they
put the trade
up… again,
nothing you can
do… wish they
didn’t do it…
but those are
situations… I
always like to
tell you when I
can give you an
edge and make
you money… I
can’t give you
an edge or make
you money… and
nor can anybody
else… and if
they claim they
can… they are
wrong.
``````````````````````````````````````````````````````````````````````````````````
[verbatim recap]
[end of segment]
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