Investing Strategies for Beginner to Intermediate Skilled Investors

jakester318

Sparrow
I have been investing for years but admittedly, I am not a very skilled investor. In fact, for many years I always lost money (over $10k) and then I grew jaded and started to hate the stock market completely. I used to think it was rigged. In fact, I stopped investing altogether for a period of 3 years. In those 3 years, I started to dabble in Daily Fantasy Sports betting. In particular, I grew to be a big fan of Draft Kings NBA and I really loved NBA Showdown Captain mode. After playing the game at least 1x a week for an entire NBA season, I started to build a process for how I evaluated good picks and I was starting to win consistently. I wasn't playing big money but only $.25 games. I cared more about learning the strategy of playing to win than winning a ton of money.

One day it occurred to me that maybe investing in the stock market was similar to sports betting. You can make money in betting, but you have to have discipline, not be emotional, but mostly you have learn the combination of good data analysis and intuition. So in the middle of COVID last year (around May), I took $3k and decided that I was determined to try the stock market again. I wasn't going to make the same mistakes I made before. I was going to use my intuition more and trust the instincts I sharpened while playing DraftKings and placing in tournaments where there were over 50K participants. If I could win money in a tournament with thousands of other players on a consistent basis, I must be good enough to make money in the stock market. Well, to date, I have doubled that initial $3k. I thought I'd share some of my insights with anyone on this forum to help others and maybe to hear about strategies others use to make money.

DISCLAIMER: I'm not selling a service, nor am I am investment professional. I don't have a YouTube channel where you can go listen to my secrets of investing. I'm a regular guy who uses tried and true strategies that work for me (I don't have a ton of money to invest either). If you don't like my approach, I don't care. I'm not asking for anyone's approval. I'm looking at investing like there are many different strategies to be successful and there isn't one strategy that's better than others. I'm looking for real ideas and not simply stuff like "go check out this guy's video" or "read this guy's book." If you don't know how to invest and you don't know how to make money in the stock market, I'm not interested in reading someone else's ideas, I'm only interested in hearing from people who invest and have developed their own strategies and can back them up with solid reasons for why they do what they do.

30 day challenge:

For the past 30 days (roughly May 1st or so) I started going to www.finviz.com and using the Stock Screener. One of the Stock Screener options is the Performance screener. I started to look for patterns where a stock's Perf Week was significantly low (like worse than -10%). So a stock has been obliterated so much that it's lost 10% or more of its value in one week. Then I would contrast that with more longer term performance, like a recent month or quarter. I settled on one strategy that made sense to me. If a stock has lost a ton of value in one week's time but it's more longer term performance was positive, then maybe the stock was being sold off institutional investors that were dumping the stock to rebalance their portfolios and bring other stocks in. The stock might not be a poor performing stock or anything like that, so maybe it was worth looking at.

One such stock was BKD. I watch this stock quite a bit because I see that it has a lot of potential in the healthcare space. It was flying high for a good period then dropped off precipitously, only to rebound again.

Another strategy I employed recently was bottom feeding off of stocks that are down a great deal in a trading day, regardless of how well or poor they perform. I am purely speculating on the fact that the stock has been beaten down tremendously but it will likely rebound. Another stock like this was BTU. BTU swings wildly and I've made some money from it. To adjust for my risk aversion, I buy in on a significant down day but only 10-20 shares. If it continues to slide the next day, I might buy in another 5-10 shares. And ultimately, once a position is held, it's waiting out the ride until the next big pop. And if you watch many of these stocks, they tend to have a single day where the value can jump a significant amount.

My recommendation is to follow the patterns of a handful of stocks by using the Stock Screener I mentioned. Just observe the patterns of movement and identify opportunity points of entry and pretend as if you really were to move on a stock and buy it, and test your intuition. But also reading about the stock and understanding some of the drivers that make the stock move positively or negatively (this will differ according to industry: biotech vs energy as an example).
 

Max Roscoe

Pelican
The best advice I've heard recently on investing is to look abroad, specifically at the Japanese market. The US and International (Japanese?) markets typically ping-pong back and forth on performance. In the 80s, Japan handily beat US returns. The 2000s, the US took the lead with the "Dot Com" nonsense. There was a fairly regular pattern repeating every 20 years.

Well, the US market has all the signs of poor performance: Incredibly high prices (P/E ratios), abnormally large focus on a single sector (technology), and declining currency value. And, if you put any credence in the 20 year cycle, well, our time is up.

I don't know much about investing internationally, but I would seriously recommend checking out a foreign mutual fund.

As for the type of analysis the OP is doing, it sounds like you are looking primarily at recent pricing fluctuations, and not the underlying performance of the company. That is the exact opposite from the way I analyze investments, though I will say that as the stock market system is completely broken and basically rigged, that it is likely one could make good money with that method. I'm still more of a Warren Buffet examine the fundamentals type of guy.

There may be some correlation there, but to me, just because a company had a price which was volatile recently, does not make it a good buy (nor a bad one--it just doesn't say anything at all about the company's value to me).

Anyway, pin this and if Japan starts having stellar returns over the next 5 years you can say you heard it here first.
 
"Trusting your intuition" and "speculating" have absolutely no place in intelligent investing, and are among the top reasons why people lose money in the stock market (the other one, related to the other two, is "impatience.") Investing and trading are very different things, so it's also important to know what the words you're using mean so as not to confuse either yourself or other people.

Trading, specifically day or swing trading, is when you buy and sell in a short frame of time (one day for day trading or a bit longer for swing trading). For 90% of people it is more or less gambling, and almost nobody succeeds at it long-term. On top of that, trading fees and/or short-term capital gains tax can wipe out a lot of your bankroll. Many people claim to have found a secret formula for trading, involving reading charts a certain way or looking for certain patterns in price movement, and again - almost none of these people are successful long-term.

Investing is when you identify a company that your research and due diligence - which should take you a bare minimum of an hour of work per company, and only that small amount of time once you know what you're doing - and choose to invest in it based on its having the proper metrics, CEO approach, etc. Investing intelligently requires more work than most people are willing to do, which is why investing in simple index funds is the best approach for most people. I don't do it because you end up investing in companies that promote subversive propaganda that way...one of the main reasons I choose companies individually.

Intelligent investing is boring, there is no excitement / intuition / speculation involved - so one of the most important questions to ask yourself is if you're trading/investing because you want your money to multiply, or whether you're doing it to satisfy a gambling addiction and the emotional roller coaster that comes with it. Far more people are in it for the second reason than are generally willing to admit.

Over the long haul, the strategy called "value investing" gives the best returns. It is boring, mechanical, and involves picking the right companies and then waiting years for your research to prove itself.
 

Zanardi

Woodpecker
I think the OP means that he tries to find the underperforming stocks and buy those, hoping that they will go up eventually.
 

Hypno

Crow
You certainly can gamble on the stock market, but you can also invest. Investing is expending money with the expectation of a return or profit based on the efforts of another. Speculating, which is akin to gambling, is expending money with the hope of return based on the assumption of a temporary price discrepancy. For example, if you thought the government was going to legalize canabis, then buying canabis stock would be a speculation. If you thought canabis is a good long term business then buying it would be an investment. While both result in the same action, buying the stock, the reason for buying affects when you exit.

Two things even investing have in common with gambling is position size and exit strategy. If you go to Vegas with a $1000, you don't bet $1000 on each hand, maybe $50. It should be the same with investments. Also, you should cut your losses soon but let your winners ride. Have a strategy for exiting a stock. Know what a trailing loss is and how to use them (i.e. on a spreadsheet, not at the market).
 

jakester318

Sparrow
Two things even investing have in common with gambling is position size and exit strategy. If you go to Vegas with a $1000, you don't bet $1000 on each hand, maybe $50. It should be the same with investments. Also, you should cut your losses soon but let your winners ride. Have a strategy for exiting a stock. Know what a trailing loss is and how to use them (i.e. on a spreadsheet, not at the market).
Exactly. This is what I've been doing. Not investing big amounts, but smaller ones, at key intervals in the movement of the stock. Obviously, I don't know the direction of a stock but I am seeing patterns and you can be right at least 50% of the time, which direction it's going on :)
 

Hypno

Crow
Exactly. This is what I've been doing. Not investing big amounts, but smaller ones, at key intervals in the movement of the stock. Obviously, I don't know the direction of a stock but I am seeing patterns and you can be right at least 50% of the time, which direction it's going on :)

So in the stock market, about 70% of a particular stock price fluctation has nothing to do with the stock. Sometimes, all stocks are up or down that day due to the news, the Fed, interest rates, whatever. Also, all stocks in a particular industry might move one way. Used car prices are up so this benefits auto rental companies like Hertz. So you have to have a plan and not get shaked out of a stock, but you also have to know why you bought it. If you buy a stock for a particular reason, like you think Biden will legalize Canabis, and he doesn't, then sell the stock even if the price hasn't changed.
 

C-Note

Ostrich
Gold Member
For the past 30 days (roughly May 1st or so) I started going to www.finviz.com and using the Stock Screener. One of the Stock Screener options is the Performance screener. I started to look for patterns where a stock's Perf Week was significantly low (like worse than -10%). So a stock has been obliterated so much that it's lost 10% or more of its value in one week. Then I would contrast that with more longer term performance, like a recent month or quarter. I settled on one strategy that made sense to me. If a stock has lost a ton of value in one week's time but it's more longer term performance was positive, then maybe the stock was being sold off institutional investors that were dumping the stock to rebalance their portfolios and bring other stocks in. The stock might not be a poor performing stock or anything like that, so maybe it was worth looking at.

One such stock was BKD. I watch this stock quite a bit because I see that it has a lot of potential in the healthcare space. It was flying high for a good period then dropped off precipitously, only to rebound again.

Another strategy I employed recently was bottom feeding off of stocks that are down a great deal in a trading day, regardless of how well or poor they perform. I am purely speculating on the fact that the stock has been beaten down tremendously but it will likely rebound. Another stock like this was BTU. BTU swings wildly and I've made some money from it. To adjust for my risk aversion, I buy in on a significant down day but only 10-20 shares. If it continues to slide the next day, I might buy in another 5-10 shares. And ultimately, once a position is held, it's waiting out the ride until the next big pop. And if you watch many of these stocks, they tend to have a single day where the value can jump a significant amount.

My recommendation is to follow the patterns of a handful of stocks by using the Stock Screener I mentioned. Just observe the patterns of movement and identify opportunity points of entry and pretend as if you really were to move on a stock and buy it, and test your intuition. But also reading about the stock and understanding some of the drivers that make the stock move positively or negatively (this will differ according to industry: biotech vs energy as an example).
I've noticed this also while trading penny stocks over the past three months. If you watch a stock for awhile, you learn what it's average price seems to be, then you can discern when it bottoms out and is poised to rebound, so you can buy more shares of it then. Also, if you have the time, you can check your dashboard a couple of times a day and buy some shares if one of your holdings happens to get hit with a steep, but momentary decline.

I've tried dollar-cost averaging by initially buying small amounts of a stock, planning on buying the dips. This has worked-out well for me with some stocks (like Citius, Strongbridge, and ATyr), but has backfired with others. For example, I bought a few shares of Capstone (CSFFF) at $3 and Aya (MYAGF) at 3.73, planning on buying the dips in both. The problem is, in three months not only have they not dipped, both of them have gone much higher. Capstone is now consistently trading around $4.50 and Aya around 6.80. So, I missed out on some decent profits by not buying more into them in the first place. However, the opposite has also happened. I went fairly big in an initial buy with Celsion, and then the stock almost immediately tanked and has been trading much lower ever since, so that "buying the dips" with it is ineffective unless the stock ever resumes its value again, which it may or may not do.

It seems like a good stock will eventually reach a critical mass in interest from traders, and then it will "pop" and trade indefinitely at a much higher average price. Being able to guess when the stock of what appears to be a solid company is going to reach that critical mass looks to be a valuable skill.
 
Last edited:

Stats

Woodpecker
Op what you wrote is more stock picking then investing strategy..

here is a rather fool proof investing strategy. first make comprehensive list of as many uncorrelated assets as possible. then assign each a precent value of the portfolio. then on a regular basis buy/sell each cotagory to keep the percentages equal.


real estate 40%
bitcoin 20%
stocks 20%
precious metals 10%
commodities 5%
bonds 5%

then say once a month rebalance. to the same percentages in your initial plan. say bitcoin doubled in value and the stocks when down 25%. you would sell half your bitcoin and invest half of the gains in stocks.
 

jakester318

Sparrow
I've noticed this also while trading penny stocks over the past three months. If you watch a stock for awhile, you learn what it's average price seems to be, then you can discern when it bottoms out and is poised to rebound, so you can buy more shares of it then. Also, if you have the time, you can check your dashboard a couple of times a day and buy some shares if one of your holdings happens to get hit with a steep, but momentary decline.

I've tried dollar-cost averaging by initially buying small amounts of a stock, planning on buying the dips. This has worked-out well for me with some stocks (like Citius, Strongbridge, and ATyr), but has backfired with others. For example, I bought a few shares of Capstone (CSFFF) at $3 and Aya (MYAGF) at 3.73, planning on buying the dips in both. The problem is, in three months not only have they not dipped, both of them have gone much higher. Capstone is now consistently trading around $4.50 and Aya around 6.80. So, I missed out on some decent profits by not buying more into them in the first place. However, the opposite has also happened. I went fairly big in an initial buy with Celsion, and then the stock almost immediately tanked and has been trading much lower ever since, so that "buying the dips" with it is ineffective unless the stock ever resumes its value again, which it may or may not do.

It seems like a good stock will eventually reach a critical mass in interest from traders, and then it will "pop" and trade indefinitely at a much higher average price. Being able to guess when the stock of what appears to be a solid company is going to reach that critical mass looks to be a valuable skill
Yeah, man, this is exactly the type of strategy I'm talking about. I figure if you really focus on a few stocks and watch their cycles over a period of time (say a quarter), you can gauge how the market is treating them.

One stock that I've followed for a year is Lumber Liquidators. It's got a lot of peaks and valleys and although its earnings are good, the market still hammers it but then it breaks out sporadically. IVR is another stock that does the same thing. I average cost 10 shares at a time, and since brokerage firms have moved to zero cost trades, it's even that much better. I'm long on IVR because I think it's going to break out eventually.
 

scorpion

Ostrich
Gold Member
There is no strategy to what you're doing. It's not investing at all. It's pure gambling. Do you really think you're the first guy to think he can outsmart the stock market? Do you think you have some special insight or are just that much smarter than everyone else?

"I'm just gonna watch the stock price and learn to predict it over time, then I will buy the dips and sell the peaks. It's foolproof!"

What could go wrong? If it's that simple, why doesn't everyone just sit on their butt and trade stocks for a living? Answer: because it's not that simple, and is going to blow up in your face sooner or later.

Want to know what beginner and intermediate investors should be doing? Buying passive index funds and/or large cap, blue chip, dividend paying stocks. But instead, all too many fall into traps like we see in this thread, where they think they can outsmart the market with carefully timed buying and selling. It very rarely ends well except for a lucky few. Many eventually come to their senses over time, and emerge as skilled and experienced investors, at which point they simply come back around to what they should have been doing in the first place: buying passive index funds and/or large cap, blue chip, dividend paying stocks.

Investing, done properly, is extremely boring. The most successful investors own things like apartment complexes, gas stations, laundromats, fast food franchises and transportation companies. Note the extreme lack of sex appeal. If you ever find yourself getting excited by your "investments", it's very likely you are no longer in the realm of investing, and are actually gambling.
 

C-Note

Ostrich
Gold Member
There is no strategy to what you're doing. It's not investing at all. It's pure gambling. Do you really think you're the first guy to think he can outsmart the stock market? Do you think you have some special insight or are just that much smarter than everyone else?
I don't believe the OP is promoting day trading, which is close to gambling. What he (and I) are promoting is how to buy the stocks that you pick at the best price. You should use time-tested investment strategies when selecting a stock, such as checking to see if its outstanding share pool is overly diluted, what it's debt-to-equity ratio is, it's market share, etc. Once you believe the stock is backed by a solid company, then you use the strategies outlined in this thread to obtain that stock at the best price you can, by buying it when it is as low as you can reasonably expect it to get, barring a big stock market crash, when only seems to happen every 10 years or so, or a mildly sustained bear market, which happens about twice a year.

I agree that putting most of your money into mutual funds is a good strategy and its the one I have used most of my life. However, you can build your own mutual fund if you want to by gradually building your own stock portfolio over time, including the best representative companies or ETFs of different market sectors. The availability of no-fee brokerages has made this possible. And yes, I know that most people who do this aren't able to quite match the returns of many index funds, but if you pay attention to what you're doing, you should be close.

Subsequently, or at the same time, I think its fine to use about 10% or less of your money to do some stock speculation. That's what I'm doing with my penny stock investments. I'm actually using about 1% of my savings. In a way, I've built a penny stock small pharm and junior mining mutual fund, because I now have shares in over 70 penny stocks, mainly in those two sectors. If only 25% of those stocks "pop" (which I consider as reaching $10 a share in value and is not an unreasonable expectation), then I will have made more than 100% return on the investment. If they don't, it has been a fun way to pass the time while I'm working from home instead of playing video games. I exercise 2-3 hours a day, but that still leaves me with plenty of time for other things.
 
Top