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Harely, just a few comments noted below. Sorry if I sound harsh.
-----Original Message-----
From: Harley Meyer <meyer@xxxxxxxxxxx>
To: Rick Mortellra <rmjapan@xxxxxxxxxxxxx>
Date: Tuesday, December 16, 1997 12:37 PM
Subject: Re: Yhoo 3 of 3
>I have read once what a wash sale is but off the top of my head I don't
>know what it is. I think if I clean things up so I don't have a long and
>a short position in the same stock then I should be ok. Right or am I
>wrong. Then I am looking only at profits and loses. But I will look into
>the rule.
STOP TRADING! You need to understand the tax ramifications of this kind of
trading. You could end up paying taxes on non-existent wash sale "profits"!
The wash sale rule also gives individual traders a rational reason to let
irrational losing trades go to find another stock to poach. Swallow your ego
and let go of the bone! You were wrong this time. There are alot of other
stocks at the end of the rainbow.
>Actually I try to find some very specific times when I short. SO
>actually it isn't that scary. In fact it is more reliable that when the
>price becomes over extended there is almost always a pullback. The top
>of a channel is a good example.
>
>This why I like to try to short early. At the top.
Over-extended prices? The bull has death-gored many shorts on this idea.
Already good enough to call the tops and bottoms from the charts too, huh?
Don't take my word for it, read any book on short selling. You are shorting
YHOO for all the WRONG reasons. You've been lucky so far and taking $100
loss is cheap tuition for this lesson. The next time you may find yourself
happily short (or long) going to bed only to wake up facing a 15-30% price
gap up or down because of some "bad" news, even on "solid" stocks. A few
current examples may jog your memory: ASND, CS, OXHP, ORCL, RMBS
Rick wrote:
>>In fact, outside of a few S&P 100 stocks, I trade
>> Spiders
>> almost exclusively.
You resonded:
>I don't have that kind of money. I also think the risk/reward isn't
>worth it for me. Now if I could buy a 1000 shares of SPY then that's a
>different story. I can now only buy about 150 shares. So 150 shares and
>a 3/4 pt move isn't worth it. I would rather take something that moves a
>bit and buy more or even fewer shares. But hey I am young and full of
>sponk. Probable 5 years from now I will be investing in CDs and Bonds
>because I can't take it any more. (humor here).
Frankly Harley, these sound like words from a posterboy for Gamblers
Anonymous. You're craving action now, not profits. As a beginner, you should
focus on making good trades. Profits will flow from this.
I assume you have a trading account of about $13,000 (150 x $90). Let's
further assume you bet it all (foolishly) on 150 SPY's. Even the most common
textbook money management guideline of a maximum 2% at risk ($260) puts your
stop loss close enough to SPY's daily range of 1.5 points. In short, its
volatile enough to test your trading ideas without killing you off if you're
wrong. A 30% return for just being long makes it even sweeter. Plus, most of
the "news" that drives the S&P telegraphs itself and can reasonably
anticipated so you can take action. When you trade individual stocks, you
never know when some rogue "news" wave might turn your stroll on the beach
into a nightmare in shark infested waters.
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