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February 1st, 2013, 07:58 PM   #1
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Stock picking

Hey there,

I just took a job as a junior stock broker. We are having a competition with a fictional 100 000$ portfolio.

I can pick anything --- stocks, bonds, forex, even insurance.

I took Calculus II, took multivariable calculus (and failed), Linear Algebra I, Linear algebra II (and failed),
then I dropped out due to being extremely irresponsible in daily habits.

I'm thinking about reading the book by Edward Thorp on this to get an idea of which stock to pick, is this a good idea? ... market.pdf

and this: ... on2007.pdf

Because well.I'm not at all sure what I'm doing and I have no real faith in current (mainstream) stock market predicting strategies,

Also, we use software doing Monte Carlo simulations at work to evaluate the chances of a client making it to retirement with their current portfolio, how accurate is this thing?

I'm less looking for a suggestion for individual stocks but a methodoloy.
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February 2nd, 2013, 11:43 AM   #2
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Re: Stock picking

If your goal is to win this competition you should look at the number of competitors and choose a strategy sufficiently risky to be able to beat all of them. This will not be a good strategy in general!

Originally Posted by Spook
I have no real faith in current (mainstream) stock market predicting strategies
You're off to a good start, then.

I think that it's a fool's quest, that you should think in terms of optimizing for a particular long-term goal rather than heavily overweighting single stocks and thinking yourself a genius when, by chance, they do well (and writing it off to bad fortune when they don't).
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February 2nd, 2013, 12:19 PM   #3
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Re: Stock picking

Oh, I have no illusion on the purpose of the competition

The competition is rigged so that it shows to the brokers that one guy may be right once or twice, but the boss is always going to be within the 2nd or 3rd place (out of an office of 15-20 ish brokers) over several 6 month competition. he takes the most conservative possible strategy based upon fundamentals. He can't order us to pick a specific strategy since we're 100% commission so he tries a subtle game of carrot and stick.

But anyway, it's 240 $ if I win... so its good pocket money and good education.
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February 2nd, 2013, 12:32 PM   #4
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Re: Stock picking

but yea i agree in the long run, it is certainly a fools quest and I am not going to use that strategy in general.

Can't edit so I'll just say It is more important to find my muse then to win the 240$.
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February 23rd, 2013, 07:53 PM   #5
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Re: Stock picking

As a trader myself, I'll offer this: I've had much more success trading the broader indices and currencies, and a handful of commodities, rather than trying to pick individual stocks. Pay attention to the macro view of the global economy, interest rates in different countries and changes in those rates, overall sentiment, what the talking heads say, etc. Here's an example: Being short the Japanese Yen over the last several months has been a no-brainer. Abe is hell bent on devaluing the Yen, which has been appreciating for years and has been hurting their exports due to the Yen being relatively expensive to buy. The more expensive your currency, the more expensive your exports are, and thus, your exports decline and hurt your economy. That's why Abe wants a weaker Yen. Japan's interest rates are lower the ours (the U.S.) at .10%. Capital flees low interest rates to find more return in currencies with higher interest rates, like the Australian Dollar, New Zealand Dollar, Euro, etc. That's why you're seeing the Yen sell off so hard, because of the low interest rate, Abe's rhetoric, etc.

As for the stock market indices, just remember that the trend is your friend. LOL I'm largely a technical trader, and MACD is one of my favorite indicators. Try using the MACD crossovers on the daily charts to helptime your entries. A general rule of thumb is to buy the up cross when the daily 50 MA is above the daily 200 MA. Try scanning through some charts with those indicators and see if that helps. Technicals aren't everything, but they definitely assist you in navigating through the markets. At least they do for me. And keep it simple too. Too many indicators is bad in my opinion, and overuse can lead to "paralysis by analysis".

There's a LOT of information out there on trading and investing, and there's certainly more than one way to skin a cat. If you're working for an investment brokerage they probably want you to focus more on fundamentals, but there's definitely some great technical strategies that you can use to refine your skills. One very important one is price action at key levels, such as support and resistance, pivot points, round numbers (psychological), etc. I don't want to drown you with too much information, but these are some things that merit further research.

Good luck!
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