BECOME A BETTER INVESTOR

By Ron Nathan  aka Mr. BearBull

(Email Add: mrbearbull@gmail.com)
ORIGINALLY, when I wrote this article last year, it was entitled the Ten Commandments. However, this time, there are only nine, as I decided to omit the one about adultery. When Moses went up Mount Cyanide, he came down with two heavy tablets made of stone, engraved in Hebrew. Unfortunately, I am much older than he was, so I took the cable car up Mount Mayon and instead of bringing down two large tablets, I brought down two capsules. I had them translated from Mayonaise to English and here they are.

Despite the humorous introduction, the rest of this article and the next one will completely change your investment psychology and you will be a far better investor in the future. What follows is based on 52 years' experience in London and Manila. You can profit from my observations and mistakes. It will be particularly useful for beginners whose knowledge of investing is limited. Good luck, and if you find it useful, cut out the articles and paste them on your bedroom or office wall, in between your pin-ups of Beyonce and Anna Kournikova

1. Do not trade against the trend
You will be shocked to learn that almost 90 percent of investors in the Philippines, US, UK and Japan lost money in the stock market. This is because they ignore the first commandment and jump in only after the market has already had a big rise. Let us examine the Phisix first.

On Jan. 9, 1997, the index stood at 3,420. Since then, it has been changed three times, with the worst performers weeded out and replaced by better companies. Despite this, the Phisix is still less than half of its level, seven years ago. So, in theory, you have lost about 55 percent of your money. But this does not take into account inflation, which in earlier years was very high. Adjusting for the depreciation of the peso, you have lost 77 percent. During this period, you would have received hardly any dividends whereas you could have earned 10 percent-plus on bonds. Allowing for the loss of seven years interest, your real loss is around 90 percent.

It was the same story in Japan, where the NIKKEI plunged from, almost 40,000 down to 8,000, and is still only a quarter of what it was in 1990. You would have done far better to buy a 10-year US treasury bond, when the dollar was P25. Or you could have bought gold, property or an oil tanker. The value of super tankers has tripled in the last year and is expected to go higher.

So why invest in the stock market at all? The short and honest answer is that you should not, unless you follow the rules, which I will set out in the next few weeks. The prime requirement is patience. I no longer trade because of my blood pressure but over the past seven years my clients have been out of the market for six of them. There is no such thing as long-term investment. Ask the Japanese, whom after 14 years are still losing 75 percent of their capital.

You only BUY when the market has fallen and the technical indicators say that it is about to turn up. There are many indicators and I will deal with some of them next week so do not ask me what they are now. Conversely, you SELL when that index has had a big rise and the indicators show that momentum is slowing down or is about to decline.

But what happens in reality? When Joseph Estrada was elected president, the market rose sharply and most players jumped in near the top. Over the next year, disillusionment set in and the Phisix eventually fell below 1,000. Then when Gloria Macapagal-Arroyo replaced Estrada, the index opened 500 points higher and a very large fund bought huge quantities of MER-B at P86.

That morning, I sent a message to my subscribers at 9:40 to SELL EVERYTHING because, while I was pleased with the change in the presidency, the numerous problems facing the country remained. By the end of the trading session, the Phisix had lost 250 of its 500 points. Eventually, the index again fell below 1,000.

Players do not use their head, they trade on their emotions, and this is nearly always wrong. I will tell you where to get the necessary fundamental and technical data, but in the meantime, you can use a 20-day moving average of the index or any stock, which you hold. You do not need a computer for this. A P100 calculator should suffice. If you have a computer program, you have a big advantage over the average investor.

2. Cut your losses quickly
Years ago, before the 9/11 attack, a financial journalist wrote two books called Market Wizards, in which he interviewed about 50 fund managers who had outstanding records over a five- to 10-year period. Obviously, this could not be just attributed to luck so he interviewed them in great detail, hoping to find the connecting link. They traded commodities, currencies, options, futures and stocks.

They came in all shapes and sizes, short, tall, fat, thin, and it took him a long time to find the connection. Some were pure fundamental analysts who never looked at charts; others were technical analysts who did not know one side of a balance sheet from the other. Some studied economics and neural networks while others preferred tarot cards or horoscopes. Some had master's degrees or doctorates while others came from the street where they ran the numbers game (jueteng) or horse racing. Some were extremely serious and studied DESCARTES while others made terrible puns, were covered in tattoos and wore nose rings. It took him a long time before he hit on the solution.

As the first four groups were highly leveraged, about 10 to 1, they followed the principle of POP COLA.

Prolong Our Profits Cut Our Losses Aggressively

Incredible as it may seem, although they took great care in their entry points, 63 percent of their transactions resulted in small losses. About 30 percent made small gains while the remaining seven percent scored huge gains, doubling, tripling, quadrupling or even becoming 10-baggers, because of the leverage.

So, when you get it right, let your profits run until momentum stops rising. But when you get it wrong, SELL three percent below your buying price. I did this with Piltel recently, selling three fluctuations below P2.50. It is now P2.20. Sometimes, this will be a mistake but it protects you against disaster. After all, you don't complain about paying fire insurance because your house didn't burn down. You can afford to cut small losses. It is the big ones that ruin you.

3. Do not average down
Under normal circumstances, I am against the death penalty, but not for those who break this commandment. They should be barbecued slowly over a fire while concentrated hydrochloric acid is dropped upon them. All the people I know who went bankrupt averaged down.

In 1996, the market climbed steadily, accelerating in the final months. A client entrusted me with P4 million and, as the market was so strong, he opened a margin account for another P4 million. After a year of hectic trading, his portfolio was worth P22 million in cash. At that point, I told him that I was returning to London for a week to see my mother because it was her 90th birthday, and not to buy anything while I was away.

Unfortunately, he went to a company meeting where a director told him (and 100 other people) to buy the shares at P5.40 as there was going to be a secondary offering between P10 and P12 the following month. He invested all his capital in the purchase of four million shares. When I returned, he told me what he had done and I lost my temper. "I can't sell," he said, "because the shares are now only P5, and I would lose P1.6 million plus expenses." "But I made for you P18 million," I said. "Why can't you take a loss?" Well, he refused and the shares kept on falling, P4, P3, P2, P1, P0.50. Eventually, we parted company and as far as I know, he never sold them. The shares fell to P0.03 and have now been de-listed, after the company filed for bankruptcy.

Another client bought 20 million shares at 54 centavos on the advice of his neighbor who was a director of the company. I was acutely unhappy because they had risen from their par value of 1 centavo. Not only would he not sell at 50 centavos as I suggested, but also he averaged down at 40 cents, 30 cents, 20 cents and 10 cents. He had to sell his house and his business to raise the money. Finally, the shares stabilized at 1 centavo, the price they are still at.

If you follow the second commandment, such disasters cannot happen to you, so you will never be faced with the decision of whether to average down.

4. Do not overtrade
If you are trading everyday, the only person making money is your broker. The expense involved is too high. You have to pay two commissions, usually 0.5 percent plus value-added tax, and a 0.5-percent sales tax. In addition, there is the difference between the bid and offer price, usually about two percent. So you have to make four percent just to break even. This is fine, so long as you BUY just as the stock is turning up, but if you deal constantly, the expense will ultimately cripple you.

That small percentage is enough to make all the incredibly costly casinos in Las Vegas profitable. They can afford to give free rooms, free food and drinks, and free shows to high rollers because they know that a percentage advantage of 3.6 percent is enough to guarantee the house a sure profit over the long run. Trade only when the technical indicators tell you to. For the remainder of the time, do nothing. Patience is a virtue.

5. Do not trade on tips
In England, we say, "Where there's a tip, there's a tap."

I am sure you all remember BW Resources, now Fairmont Holdings. The shares were run up deliberately by a consortium that, by tips and cross trading, created enormous volume and sent the shares from P0.40 (under a different name) to P108. Almost everyone got sucked in, mostly at the higher levels, and those speculators who did not use stop losses saw their shares go all the way down to P0.40 and below. One old lady wrote to me that her broker had recommended it at P104. Would she ever see her money back? I replied, somewhat unkindly, "Only if you believe in reincarnation." These days, few people follow tips and public participation is minimal, as can be seen from the low net turnover.

6. Do not chase prices
When I recently recommended Pilipino Telephone Corp. (stock symbol: PLTL) for long term, subscribers bought at around P1.88 and a week later readers bought at P2.04. But those who did not read the article until the evening piled in next day, paying up to P2.55. This was sheer lunacy and I told subscribers to SELL and wait for a correction. The SEC has now stated that Smart Communications does not have to make a tender offer after all, as they bought the shares at P0.2059, so it would have been an appalling waste of time and money. I repeat that there is nothing to go for in the short-term, but if you can take a one-year view, the shares should go up to at least P3.

When shares take off, they usually fall back. Look at MAC, up and down like a yo-yo. OPM jumped from P0.0032 to P0.0060 and then dropped back to P0.0032. At that point, I recommended them in my newsletter as a SPECULATIVE buy and in four days, they were up 30 percent. At least, there is some substance because they are part of a group drilling for oil. No, I do not hold any shares.

7. Be wary of inactive stocks
The documentary stamp, which made trading in shares well below their par value prohibitive, has been removed. As a result, trading has increased tenfold and, numerically, third-liners comfortably exceed leaders. But in value, out of 122 stocks that traded last Friday, only 10 traded P10 million and accounted for over 90 percent of turnover.

I have a computer program that tells me when a stock increases in price by five percent, and its volume is 50 percent above its 50-day moving average. This alerts me to inactive stocks that suddenly become more active. Often, the spread between bid and offer is too great or the number of shares available is too small to be of any interest. But occasionally, it throws up something interesting. MAB was a case in point and it has doubled over the past 2 weeks on large volume.

8. Buy low priced stocks
By this, I don't mean stocks quoted at a fraction of a centavo. I mean decent stocks standing around, or above, their par value of P1.00. Obviously, it is easier to double your money on a low-priced stock than on a high-priced bank or insurance company. Even Philippine Long Distance Telephone Co. (stock symbol: TEL), my most successful recommendation (up over P1,000), is not likely to double from this level. I expect it to reach P1,500 next year, but in percentage terms, this is only 15 percent. There are not many stocks worth looking at, but there are one or two.

The last commandment is

9. LEARN TECHNICAL ANALYSIS and I will tell you where to get information.
Learn technical analysis

THE ABOVE commandment is slightly misleading because if you desire to become a really competent investor, you must also learn global economics and fundamental analysis.

By global, I do not mean that you have to study every country, but you must at least know what is happening in the United States.

Wherever the American stock market is heading, the rest of the world will follow. After the 9/11 attack, the US market got battered for a few months and every other stock market followed the downtrend. When the US market finally got back on its feet, every other market recovered.

How do you learn about the American stock market? First, listen every night to Bloomberg, assuming that you have cable TV, and tune in to CNN.

Listen to Chairman Alan Greenspan when he addresses the Senate or Congress. This usually starts at 9:30 p.m. or 10 p.m., but I must admit that he is not the easiest person in the world to understand.

If you cannot do this, then read his speeches in the newspaper or go to the Internet and check on CNN Money.com or Bloomberg.com and also read the commentaries.

When Wall Street sneezes, the rest of the world catches pneumonia.

Basic knowledge

For the local market, the business section should give you all the necessary information. But if you want more details, go to the websites of the National Economic and Development Authority or the Philippine Stock Exchange and listen to Channel 21, which is largely devoted to the economic and political situation of the Philippines. You can also enroll in courses at universities and colleges.

Next, you should have a basic knowledge in fundamental analysis.

This means that you need to know all about companies. You must know how to read a balance sheet, calculate the earnings per share and from this, the price/earnings ratio.

You need to understand what a yield means, how many times a dividend is covered, and what preferred and convertible stocks are.

You should know book value and understand such concepts as debt and cash flow.

You can take a course in accounting or business management, and there are plenty of books, local and imported, in all the major bookstores.

Do not ask me to recommend one because I studied accountancy in 1951 and have not read any books since then.

By now, you are probably too discouraged to read on, but don't despair because help is on the way.

If you want to buy a simple but excellent technical analysis book, try TECHNICAL ANALYSIS OF THE FUTURES MARKET by John Murphy, available possibly at local bookstores or at amazon.com.

It was written years ago but is still considered to be a classic. Every aspect is explained simply and it can be used for trading stocks, commodities, currencies or futures.

What is Circular Trading?

Circular Trading is a fraudulent activity in the stock market involving two brokers or market players trading a stock back and forth to give the impression of huge trading volume.

In Circular Trading sell orders are entered by a broker who knows that offsetting buy orders, the same number of shares at the same time and at the same price, either have been or will be entered.

Circular trading is typically rampant in a market that is tending upwards. The problem is that retail investors trade on momentum. This means that these investors enter the market when volumes are high; for high volumes are perceived to mean higher market interest and therefore higher prices.

The trouble starts when the market players who engage in circular trading decide to offload their holdings, sending the stock into a tailspin. Should retail investors get stuck with such stocks, the total money flow into the market will reduce. And that could be some cause for concern for the economy as a whole. The reason is that vibrant markets can propel economic growth, if they sustain for a long while. It is to prevent circular trading and, perhaps, its consequences that the stock exchange has shifted certain stocks to the trade-for-tradesegment.

What is Trade-for-trade?

Under the trade-for-trade segment, every transaction is individually settled. Suppose a trader buys 1,000 shares of a stock for Rs 45 per share in the morning and sells the same quantity of shares in the afternoon for Rs 50 per share. Under the rolling settlement system, the broker is permitted to net the buy and sell transactions, and pay Rs 5 per share less brokerage to the trader.

In the trade-for-trade segment, the trader will have to pay Rs 45,000 to take delivery of the 1,000 shares bought, and will have to make delivery for the shares sold. Since each transaction is treated separately, scope for circular trading is restricted. The reason is that trader ramping up the stock price will have to pay the amount to take delivery of the shares bought. And that would entail large outlays.

The trade-for-trade segment appears a good measure to lower the systemic risk due to circular trading. The stock exchanges should, hence, actively consider shifting stocks to this segment rather than slapping special margins on the stocks considered speculative.

Now the BSE routinely raises the special margin on stocks based on some undisclosed criteria to deter speculative trading. But it is not effective in a vibrant market because retail investors enter in droves in stocks based on momentum; and such speculative stocks carry high momentum.

That said, shifting stocks to the trade-for-trade segment would help contain systemic risk better if the stock exchanges are more transparent in their criteria for choosing such stocks.

Transparency: At present, neither the BSE nor the NSE states the criteria for shifting a stock to the trade-for-trade segment. Defining the basis for such a shift would provide a perspective for traders and retail investors of the quality of trading in each stock.

Suppose the exchanges state that they consider stocks with delivery-to-traded quantity ratio of less than 10 per cent, and price change of more than 50 per cent in a week for shifting to the trade-for-trade segment.

Traders and investors will keep hawk-eye on stocks that fit such a criteria (such an information can be obtained from the NSE Web site). This will prevent retail investors from getting trapped in stocks that are victims of circular trading. Such transparency is important because stocks may decline in value after they are shifted to the trade-for-trade segment because of a likely drop in volumes.

In short, the BSE and the NSE should actively consider shifting stocks to the trade-for-trade segment as a measure to curb circular trading. Importantly, the exchanges should be transparent in their criteria for choosing such stocks.

http://www.traderji.com/trading-psychology/837-deadly-art-stock-manipulation-pt1.html

The Deadly Art Of Stock Manipulation - Part Three of Thee

"RULE NUMBER SIX: IF THIS IS A REAL DEAL, THEN YOU ARE LIKELY TO BE THE LAST PERSON TO BE NOTIFIED OR WILL BE DRIVEN OUT AT THE LOWER PRICES."

Like Jesse Livermore wrote, "If there's some easy money lying around, no one is going to force it into your pocket." The same concept can be more clearly understood by watching the tape. When a market manipulator wants you into his stock, you will hear LOUD noises of stock promotion and hype. If you are "in the loop," you will be bombarded from many directions. Similarly, if he wants you out of the stock, then there will be orchestrated rumors being circulated, rapid-fired at you again from many directions. Just as good news may come to you in waves, so will bad news.

You will see evidence of a VERY sharp drop in the share price with HUGE volume. That is you and your buddies running for the exits. If the deal is really for real, the market manipulator wants to get ALL OF YOUR SHARES or as many as he can... and at the lowest price he can. Whereas before, he wanted you IN his market, so he could dump his shares to you at a higher price, NOW when he sees that this deal IS for real, he wants to pay as little as possible for those same shares... YOUR shares which he wants to you part with, as quickly as possible.

The market manipulator will shake you out by DRIVING the price as low as he can. Just as in the "accumulation" stage, he wants to keep everything as quiet as possible so he can snap up as many of the shares for himself, he will NOW turn down, or even turn off, the volume so he can repeat the accumulation phase.

In the mining business, there seems to always be another "area play" around the corner. Just as Voisey's Bay drifted into oblivion, during the fourth quarter of 1995 and early into 1996, the same Voisey Bay "wannabees" began striking deals in Indonesia. Some even used new corporate entities. Same crooks, different shingles. The accumulation phase was TOP SECRET. The noise level was deadingly silent. As soon as the insiders accumulated all their shares, they let YOU in on the secret.

"RULE NUMBER SEVEN: CONVERSELY, YOU WILL OFTEN BE THE LAST TO KNOW WHEN THIS DEAL SHOWS SIGNS OF FAILURE."

Twenty-twenty hindsight will often show you that there was a "little stumble" in the share price, just as the "assays were delayed" or the "deal didn't go through." Manipulators were peeling off their paper to START the downslide. And ACCELERATE it. The quick slide down makes it improbable for your getting out at more than what you originally paid for the stock... and gives you a better reason for holding onto it "a little longer" in case the price rebounds. Then, the drifting stage begins and fear takes over. And unless you have serves of steel and can afford to wait out the manipulator, you will more than likely end up selling out at a cheap price.

For the insider, marketmaker or underwriter is obliged to buy back all of your paper in order to keep his company alive and maintain control of it. The less he has to pay for your paper, the lower his cost will be to commence his stock promotion again... at some future date. Even if his company has no prospects AT ALL, his "shell" of a company has some value (only in that others might want to use that structure so they can run their own stock promotion). So, the manipulator WILL buy back his paper. He just wants to make sure that he pays as little for those shares as possible.

"RULE NUMBER EIGHT: THE MARKET MANIPULATOR WILL COMPEL YOU INTO THE STOCK SO THAT YOU DRIVE UP ITS PRICE SHARES."

Placing a Market Order or Pre-Market Order is an amateur's mistake, typifying the US investor -- one who assumes that thinly traded issues are the same as blue chip stocks, to which they are accustomed. A market manipulator (traders included here) can jack up the share price during your market order and bring you back a confirmation at some preposterous level. The Market Manipulator will use the "tape" against you. He will keep buying up his own paper to keep you reaching for a higher price. He will get in line ahead of you to buy all the shares at the current price and force you to pay MORE for those shares. He will tease you and MAKE you reach for the higher price so you "won't miss out." Miss out on what? Getting your head chopped off, that's what!

One can avoid market manipulation by not buying during the huge price spikes and abnormal trading volumes, also known as chasing the stock to a higher price.

"RULE NUMBER NINE: THE MARKET MANIPULATOR IS WELL AWARE OF THE EMOTIONS YOU ARE EXPERIENCING DURING A RUN UP AND A COLLAPSE AND WILL PLAY YOUR EMOTIONS LIKE A PIANO."

During the run up, you WILL have a rush of greed which compels you to run into the stock. During the collapse, you WILL have a fear that you will lose everything... so you will rush to exit. See how simple it is and how clear a bell it strikes? Don't think this formula isn't tattooed inside the mind of every manipulator. The market manipulator will play you on the way up and play you on the way down. If he does it very well, he will make it look like someone else's fault that you lost money! Promise to fill up your wallet? You'll rush into the stock. Scare you into losing every penny you have in that stock? You'll run away screaming with horror! And vow to NEVER, ever speculate in such stocks again. But many of you still do.... The manipulator even knows how to bring you back for yet another play.

What actors! No wonder Vancouver is sometimes called "Hollywood North."

"FINAL RULE: A NEW BATCH OF SUCKERS ARE BORN WITH EVERY NEW PLAY."

The Financial Markets are a Cruel, Unkind and Dangerous Playing Field, one place where the newest amateurs are generally fleeced the most brutally.... usually by those who KNOW the above rules.

Just as I have a duty to ensure that each of you understand how this game is played, YOU now have that same duty to guarantee
that your fellow speculator understands these rules. Just as I would be a criminal for not making this data known to you, YOU would be just as criminal to keep it a secret. There will always be an unsuspecting, trusting fool whom the rabid dogs will tear to shreds, but it does NOT have to be this way.

IF every subscriber made this essay broadly known to his friends, acquaintances and family, and they passed it on to their friends, word of mouth could cause many of these market manipulators to pause. IF this effort were done strenuously by many, then perhaps the financial markets could weed out the crooked manipulators and the promoters could bring us more legitimate
plays.

The stock markets are a financing tool. The companies BORROW money from you, when you invest or speculate in their companies. They want their share price going higher so they can finance their deal with less dilution of their shares... if they are good guys. But, how would you feel about a friend or family member who kept borrowing money from you and never repaid it? That would be theft, plain and simple. So, a market manipulator is STEALING your money. Don't let him do it anymore. Insist that the company in which you invest be honest or straight... or find another company in which to speculate. Your money talks in LOUDER volumes than any stock promotion scheme. ALWAYS refuse any deal which smells wrong.

Refuse to tolerate the scams prevalent in the financial markets. This can ONLY be accomplished by KNOWING and USING the above rules. Thoroughly COMPLETE your due diligence on a company before risking a dime. Dig up the Insider Reports to find out who is blowing out their paper, how often they are blowing out their paper and whatever happened to their "last play."

Begin to use this as YOUR rule of thumb: If the insider's paper is really worthless, then avoid it. Find another's whose paper DOES hold promise and honest possibilities. In these small cap stock markets, you are investing more in the INDIVIDUAL behind the play, than the "possibility" of the play itself. Ask yourself before speculating: Could I lend this person $5,000 for a year and hope to
get it back? If not, then don't! Do it for your own good and the good of everyone else who is so foolish as to speculate in these financial markets!

The truly sane and only somewhat safe solution to all of this: FIND GOOD COMPANIES IN WHICH TO SPECULATE AND GET INTO THEM AT THE GROUND FLOOR LEVEL. Anything else is criminal or stupid. This is a case where there really isn't a gray area. It's either Black or it's White. The company and its management are scamsters or they really intend to bring value to their shareholders.

http://www.traderji.com/trading-psychology/837-deadly-art-stock-manipulation-pt1.html

The Deadly Art Of Stock Manipulation - Part Two of Three

BY GEORGE CHELEKIS

"RULE NUMBER THREE: AS SOON AS THE MARKET MANIPULATOR HAS COMPLETED HIS DISTRIBUTION (DUMPING) OF SHARES, HE WILL START A BAD NEWS OR NO NEWS CAMPAIGN." 

Your favorite home-run stock has just stalled or retreated a bit from its high. Suddenly, there is a news VACUUM. Either NO news or BAD rumors. I discovered this with quite a few stocks. I would get LOADS of information and "hot tips." All of a sudden, my pipeline was shut-off. Some companies would even issue a news release CONDEMNING me ("We don't need 'that kind of hype' referring to me!). Cute, huh? When the company wanted fantastic hype circulated hither and yon, there would be someone there to spoon-feed me. The second the distribution phase was DONE....ooops! Sorry, no more news. Or, "I'm sorry. He's not in the office." Or, "He won't be back until Monday." 

The really slick market manipulators would even seed the Internet news groups or other journalists to plant negative stories about that company. Or start a propaganda campaign of negative rumors on all available communication vehicles. Even hiring a "contrarian" or "special PR firm" to drive down the price. Even hiring someone to attack the guy who had earlier written glowingly about the company. (This is not a game for the faint-hearted!) 

You'll also see the stock drifting endlessly. You may even experience a helpless feeling, as if you were floating in outer space without a lifeline. That is exactly HOW the market manipulator wants you to feel. See Rule Number Five below. He may also be doing this to avoid the severe disappointment of a "dry hole" or a "failed deal." You'll hear that oft-cried refrain, "Oh well, that's the junior minerals exploration business... very risky!" Or the oft-quoted statistic, "Nine out of 10 businesses fail each year and this IS a Venture Capital Startup stock exchange." Don't think it wasn't contrived. If a geologist at a junior mining company wasn't optimistic and rosy in his promise of exploration success, he would be replaced by someone who was! Ditto for the high-tech deal, in a world awash with PhD's. 

So, how do you know when you are being taken? Look again at Rule #1. Inside that rule, a few other rules unfold which explain how a stock price is manipulated. 

"RULE NUMBER FOUR: ANY STOCK THAT TRADES HUGE VOLUME AT HIGHER PRICES SIGNALS THE DISTRIBUTION PHASE." 

When there was less volume, the price was lower. Professionals were accumulating. After the price runs, the volume increases. The professionals bought low and sold high. The amateurs bought high (and will soon enough sell low). In older books about market manipulation and stock promotion, which I've recently studied, the markup price referred to THREE times higher than the floor. The floor is the launchpad for the stock. For example, if one looks at the stock price and finds a steady flatline on the stock's chart of around 10 cents, then that range is the FLOOR. Basically, the markup phase can go as high as the market manipulator is capable of taking it. From my observations, a good markup should be able to run about five to ten times higher than the floor, with six to seven being common. The market manipulator will do everything in his power to keep you OUT OF THE STOCK until the share price has been marked up by at least two-three times, sometimes resorting to "shaking you out" until after he has accumulated enough shares. Once the markup has begun, the stock chart will show you one or more spikes in the 

volume -- all at much higher prices (marked up by the manipulator, of course). That is DISTRIBUTION and nothing else. 

Example: Look at Software Control Systems (Alberta:XVN), in which I purchased shares after it had been marked up five times. There were eight days of 500,000 (plus) shares trading hands, with one day of 750,000 shares trading hands. Market manipulator(s) dumping shares into the volume at higher prices. WHENEVER you see HUGE volume after the stock has risen on a 75 degree angle, the distribution phase has started and you are likely to be buying in -- at or near the stock's peak price. 

Example: Look at Diamond Fields (TSEFR), which never increased at a 75 degree angle and did not have abnormal volume spikes, yet in less than two years ran from C$4 to C$160/share. 

Example: Look at Bre-X Minerals (Alberta:BXM), which did not experience its first 75 degree angle, with huge volume until July 14th, 1995. The next two trading days, BXM went down and stayed around C$12/share for two weeks. The volume had been 60% higher nearly a month earlier, with only a slight price increase. Each high volume and spectacular increase in BXM's share price was met with a price retreat and leveling off. "Suddenly," BXM wasn't trading at C$2/share; it was at C$170/share.... up 8500% in less than a year! 

In both of the above cases, major Canadian newspapers ran extremely negative stories about both companies, at one time or another. In each instance, just before another share price run up, retail investors fled the stock! Just before both began yet another run up! Successful short-term speculators generally exit any stock run up when the volume soars; amateurs get greedy and buy at those points. 

"RULE NUMBER FIVE: THE MARKET MANIPULATOR WILL ALWAYS TRY TO GET YOU TO BUY AT THE HIGHEST, AND SELL AT THE LOWEST PRICE POSSIBLE." 

Just as the manipulator will use every available means to invite you to "the party," he will savagely and brutally drive you away from "his stock" when he has fleeced you. The first falsehood you assume is that the stock promoter WANTS you to make a bundle by investing in his company. So begins a string of lies that run for as long as your stomach can take it. 

You will get the first clue that "you have been had" when the stock stalls at the higher level. Somehow, it ran out of steam and you are not sure why. Well, it ran out of steam because the market manipulator stopped running it up. It's over inflated and he can't  convince more people to buy. The volume dries up while the share price seems to stall. LOOK AT THE TRADING VOLUME, NOT THE SHARE PRICE! When earlier, there may have been 500,000 shares trading each day for eight out of 12 trading days (as in the case of Software Control Systems), now the volume has slipped to 100,000 shares (or so) daily. There are some buyers there, enough for the manipulator to continue dumping his paper, but only so long as he can enlist one or more individuals/services to bang his drum. 

He may continue feeding the promo guys a string of "promises" and "good news down the road." (Believe me, this HAS happened to me!) But, when the news finally arrives, the stock price goes THUD! This is entirely orchestrated by a market manipulator. You'll see it in the trading volume, most of which is CONTRIVED. A market manipulator will have various brokers buying and selling the stock to give the APPEARANCE of increasing volume and price so that YOU do start chasing it higher. 

At some point during the stall stage, investors get fed up with the non-performance of the stock. It drifts for a while, in a steady retreat, with perhaps a short-lived spike in price and volume (the final signal that the manipulator has finally offloaded ALL of his paper). Then, the stock comes tumbling down -- having lost ALL of the earlier share appreciation. 

Sometimes, with the more cruel manipulators, they will throw in a little false hope... giving you a little more rope so they can better hang you. Just after a severe drop, there will be a "bottom fishing" announcement which sends the share price up a bit on high volume, rises a little more after that and then continues to drift. Meanwhile, you keep getting "shaken out" through a cruel drip-drip water torture of the share price's slow retreat. Again, virtually every movement is completely orchestrated.

http://www.traderji.com/trading-psychology/837-deadly-art-stock-manipulation-pt1.html

The Deadly Art Of Stock Manipulation - Part One of Three

BY GEORGE CHELEKIS

NOTE: I believe this may be one of the most important essays on the financial markets which you will ever read. This essay will be the lead article in Hot Stocks Review, (Part Two). Up until recently, I knew that I was missing something, but I could not quite put my finger on it. Now I know what it is. The data which follows is only as good as you can actually use it. These are the cold, savage and ruthless facts of market manipulation. I have not made these up, but have dug them up out of out-dated, generally unavailable books on Canadian market manipulations, and pieced the rest together from observations, personal experiences and conversations with market professionals and insiders. While the books are out of date, the manipulations have been passed down from one generation to another. The only thing missing was someone to supply you with what those tricks were so you can become a more educated speculator. Many thanks to Robert Short and Vern Flannery, of Market News Publishing, for finding and sending me a copy of the book, "The Story Behind Canadian Mining Speculation" by T. H. Mitchell, first published in 1957 by George J. McLeod Limited; also Ivan Shaffer's book, "The Stock Promotion Game." I have been told that many of these tricks are now illegal. If so, would someone please tell that to the market manipulators.

THE DEADLY ART OF STOCK MANIPULATION....

In every profession, there are probably a dozen or two major rules. Knowing them cold is what separates the professional from the amateur. Not knowing them at all? Well, let's put it this way: How safe would you feel if you suddenly found yourself piloting (solo) a Boeing 747 as it were landing on an airstrip? Unless you are a professional pilot, you would probably be frightened out of your wits and would soil your underwear. Hold that thought as you read this essay because I will explain to you how market manipulation works.

In order to successfully speculate, one should presume the following: THE SMALL CAP STOCK MARKETS PRIMARILY EXIST TO FLEECE YOU! I'm talking about Vancouver, Alberta, the Canadian Dealing Network and the US Over-the Counter markets (Pink Sheets, Bulletin Board, etc.). One could also stretch this, with many stocks, to include the world's senior stock markets, including Toronto, New York, NASDAQ, London, etc. The average investor or speculator is not very likely to have much success in the small cap crapshoots. I guess that is what attracted ME to these markets. I have been trying, for quite some time, to answer this question, "How come?" Now, I know. And you should, too!

By the way, the premise of these books is uniformly: "While these speculative companies do not actually make any money, one can profit by speculating in these companies." THAT is the premise on how these markets are run, by both the stock promoters, insiders, brokers, analysts and others in this industry. That logic is flawed in that it presumes "someone else" is going to end up holding the dirty bag. Follow this premise all the way through and you will realize the insane conclusion: For these markets to continue along that route, new suckers have to continue coming into the marketplace. The conclusion is insane in that such mad activity can only be short-lived. I disagree with this premise and propose another solution (see my earlier essay: A Modest Proposal) at the end of this essay.

What the professionals and the securities regulators know and understand, which the rest of us do not, is this.

"RULE NUMBER ONE: ALL SHARP PRICE MOVEMENTS -- WHETHER UP OR DOWN -- ARE THE RESULT OF ONE OR MORE (USUALLY A GROUP OF) PROFESSIONALS MANIPULATING THE SHARE PRICE."

This should explain why a mining company finds something good and "nothing happens" or the stock goes down. At the same time, for NO apparent reason, a stock suddenly takes off for the sky! On little volume! Someone is manipulating that stock, often with an unfounded rumor.

In order to make these market manipulations work, the professionals assume: (a) The Public is STUPID and (b) The Public will mainly buy at the HIGH and (c) The Public will sell at the LOW. Therefore, as long as the market manipulator can run crowd control, he can be successful.

Let's face it: The reason you speculate in such markets is that you are greedy AND optimistic. You believe in a better tomorrow and NEED to make money quickly. It is this sentiment which is exploited by the market manipulator. He controls YOUR greed and fear about a particular stock. If he wants you to buy, the company's prospects look like the next Microsoft. If the manipulator wants you to desert the sinking ship, he suddenly becomes very guarded in his remarks about the company, isn't around to glowingly answer questions about the company and/or GETS issued very bad news about the company. Which brings us to the next important rule.

"RULE NUMBER TWO: IF THE MARKET MANIPULATOR WANTS TO DISTRIBUTE (DUMP) HIS SHARES, HE WILL START A GOOD NEWS PROMOTIONAL CAMPAIGN."

Ever wonder why a particular company is made to look like the greatest thing since sliced bread? That sentiment is manufactured. Newsletter writers are hired -- either secretly or not -- to cheerlead a stock. PR firms are hired and let loose upon an unsuspecting public. Contracts to appear on radio talk shows are signed and implemented. Stockbrokers get "cheap" stock to recommend the company to their "book" (that means YOU, the client in his book). An advertising campaign is rolled out (television ads, newspaper ads, card deck mailings). The company signs up to exhibit at "investment conferences" and "gold shows" (mainly so they can get a little "podium time" to hype you on their stock and tell you how "their company is really different" and "not a stock promotion.") Funny little "hype" messages are posted on Internet newsgroups by the same cast of usual suspects. The more, the merrier. And a little "juice" can go a long way toward running up the stock price.

The HYPE is on. The more clever a stock promoter, the better his knowledge of the advertising business. Little gimmicks like "positioning" are used. Example: Make a completely unknown company look warm and fuzzy and appealing to you by comparing it to a recent success story, Diamond Fields or Bre-X Minerals. That is the POSITIONING gospel, authored by Ries and Trout (famous for "Avis: We Want To Be #1" and "We Try Harder" and other such slogans). These advertising/PR executives must have stumbled onto this formula after losing their shirts speculating in a few Canadian stock promotions! The only reason you have been invited to this seemingly incredible banquet is that YOU are the main course. After the market manipulator has suckered you into "his investment," exchanging HIS paper for YOUR cash, the walls begin to close in on you. Why is that?
http://www.traderji.com/trading-psychology/837-deadly-art-stock-manipulation-pt1.html

PGOLD power @PSE

Puregold Price Club Inc. (PGOLD) , the nation’s second- biggest operator of hypermarkets and supermarkets, increased 3.6 percent to 22.75 pesos, the highest close since May 14. The company has acquired Gant Group of Companies Inc., operator of 19 Parco Supermarket branches, a stock-exchange filing showed. - BLOOMBERG REPORT ON MAY 28, 2012.

I started my journey of trading online at PSE since March 2012. I am not surprise of nearly losing 20% of my investment, but the good news is, today i regain the 5% and hopefully to recover the remain 15% in few days time.


The reasons why i have lost part of my investment.


1. Experience is the best teacher, and it teaches hard. I have read blog, news and stories about identifying yourself as a player in the stock market. I have identified myself as a long term investor. Yet, i was curious. curious selling my stock at a gain of 3,000 pesos down to 500 pesos. First i was furious, because those warnings i have read was true like you'll pay more when you buy and sell often, often as in everyday and also you'll get tempted to sell your stock at a losing state because you are afraid to lose even more - now that's an active trader, active-losing-trader rather.


2. Refusing to pause after a lose. I got more impatient. i keep searching and looking for active traded stock with the price range from 15 - 30 pesos. I know it's not gonna be easy but i still continue to buy and sell. The result was still the same - i was an active-losing trader.


3. Daily Sentiments. My greatest fault was looking at the market daily price range. This surely bring disaster on my money. When the price goes up i am smiling, but when the price goes down, aaahhh there i am even losing i do sell my stocks.




It's been two months now since i started putting money on stock market. As of now, i feel better. regaining the 5% loss is enough for me to believe my stock position as of today. I have disregarded other shares and retain PGOLD. Only PGOLD for now, and soon i will ad more shares.


by: bodengdeng

Stock Position - May 2012

Philippine stock market has been on the news lately. Spreading it's wings widely and advancing to signal growth and encouraging investors. With the recent developments on Philippines style of governance, the people are becoming more patriotic and supportive to the government.  


I'm going to talk about stock market and positioning your stock choice. I'm a beginner in this kind of dealing but i am very interested to learn more.  I'm very impressed with my stock position on May 4, 2012 for shares of PGOLD and RLC. Although in past months i have lost nearly 5k for trading shares of ARA. The loss has made me realize what was written about being greedy will end you up with nothing but losses.  Yes, my loss has taught me to value time and think about of increasing my investment.


If you're a long term type of investor, then we are of one mind. It's doesn't matter how the price goes up and down during the trading day, what matters to me is that the closing price is steadily climbing or at least maintains its previous price.


Positioning your stock is easy. It all depends on how much money you have available for trading. If you have less than 100k money on the market, you may opt to get 3,000 shares of PGOLD and 3,000 shares of RLC. WHY? PGOLD price activity since last year of its joining has steadily grow in a manner of less risk. PGOLD 52 weeks records is 10.68 - 10.35 and the price as of May 4, 2012 was 24.75. RLC record in previous five years has dramatically change. As of 4th May it closes to 18.20. In 2007 RLC record of prices are from 12 - 17 and down in 2009 to 3 - 4 pesos. It has recovered eventually and become stay in 2011 in prices range of 11 - 12 pesos. This year, RLC proved to be profitable and it marches from 12 up to current price of 18.20. Upon reaching te price of 20, RLC will sure become the perfect stock to invest and earn with.


Remember this tips when positioning your shares of stocks:
1. Buy half-half. When you want to position 3,000 shares of stock for RLC or PGOLD or ALI or SMPH or MWC (prices ranges from 16 - 25 pesos) you may wan to buy first 1,500 and wait for few days to buy another 1,500. This reduce the risk of whole loss cause when the price goes down at least it won't be that hurtful cause you have the half of your stock as back up.


2. Price timing. If you have more money to buy additional shares, never wait until the price goes higher. the sooner you can add shares the better. I mean don't wait for the price to reach 30 pesos before deciding to add more shares.


3. Dream your stocks. It's all about faith and believing. After reading all news, stock tips and stories of other who made it to the top because of stock market, then everything goes back to you. Yes, to your belief system. Whatever type of stock trader you are, i am sure it will be more worthwhile to be of good faith and deal without being selfish. 




Happy Trading! Your money well, invested will bring you good life!

by: bodengdeng

Visit Indonesia

I am so looking forward to it.
I want to visit borobodor temple, prambanan and the famous kota beach.

See more progress on: visit Indonesia on November 2012 for 24nights

PSE - Feb 29, 2012 mypickTODAY RCB & BPI

Today i bought 100 shares RCB and 40 shares BPI. At the end of trading day the price jots lower than my expected, i bought it in a fair price and lose about 200 pesos. I guess it's not really a good start for a fresh trader like me, i know that. But it's okay, i know my money isn't in the brink of disappearance.

photo credit: reuters.com

by: bodengdeng