Re: Question for investors, traders...and investment types (and for Michael Ross too!)

Hi Boyd,

> There's a better way to do it. Look at a bar
> chart that shows the price movement of a
> stock, a commodity item, a futures contract,
> whatever. If the chart shows upward price
> movement, go long. If the chart shows
> downward price movement, sell short.

> You're trying to do is to predict the future
> by gathering information, which isn't
> possible to do with sufficient accuracy
> unless you're a person with the connections
> of someone like Henry Kissinger or the like.
> For normal people who don't have the kind of
> info Kissinger gets, it's not possible to
> make accurate trading decisions based on
> fundamentals.

Boyd, I think your caveats are true for short-term price movements of stock (which is what you're looking for in day-trading), but not necessarily for long-term movements....

Fundamental analysis CAN and does work for long-term investors, and Warren Buffett may be the most famous example of someone who uses this technique....

A very successful fund manager who also successfully uses a more fundamental approach is Peter Lynch.... (The approach Gordon talks about reminds me mostly of Peter Lynch's approach....)

The main approach is two-fold....

1. Find companies that you think have very good reasons for strong profit growth in the future.

2. Make sure that these companies are not over-valued already....

(Of course, there are a lot of details hidden in those two statements....)

So, essentially, you want to find fast-growth companies (where I mean growth in profits) and put your money in them before they are "discovered" by the mass market....

I've done this successfully myself -- for example, two companies I invested in about 3 years ago are now worth around 4 and 5 times what they were worth back then.... One of them more than tripled in price in the last 2 years....

I know you can do that with day-trading, but there you make both gains and losses. I see the long-term approach as more like betting on a sure thing (I don't like losses).... But you have to be patient.... :)

I've had NO losses yet, EXCEPT for the one time I tried day-trading as an experiment! (There I lost about 3% in 2 days, so I didn't lose too much.... but soon after I got out, the stock plunged by about 30% over the next couple weeks....)

I did have one "failure" using the long-term approach I use, but I didn't lose money on that one.... That stock just did nothing for the year I held it, then I sold it for no loss or profit....

I believe you CAN make money day-trading, but the risk is definitely higher than the more cautious approach I take....

I must admit, it's not as exciting as day-trading.... Kind of boring, really. But I like being able to ignore the stock market if I want.... I do all my work in deciding what to buy, then after I've bought I don't bother looking at the stock market again and do other things for a while.... If I've done my work well, the stock should reach it's "real" value (which is something I calculate) over the long run.... :)

Dien Rice