High Risk Stock Trading

Cirion

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I have early retirement goals which probably means I'm gonna need to front some high risk stocks here and there. Of course, high risk stocks means diversifying is even MORE important than a normal portfolio. I'm new to all this though. Anyone here have experience working with risky stocks? An example - GE. They have dropped 90% over a couple of years, and there is a risk of bankruptcy, but it has been around for a long time so I think they have a good chance to turn it around. It may bankrupt BUT the payout could be HUGE, if they turn around that's a potential for up to 1000% return. I would think though like I say, to avoid problems, you'd want to invest in a handful of risky stocks, that way if a couple crash, but a couple you win big on, it's still a bigger return than 4 more stable funds at the usual 5% return a year or so. Basically for those familiar with statistics, you want to maximize your "Expected Value" (Expected Earnings if you will). Expected value is essentially probability of winning times the return.

Example:

25% chance to "win" (1000% return on investment)
75% to "lose" (lose all your money, worst case scenario)

Even in this abysmal scenario, your expected earnings are STILL in your favor. As long as you diversify enough funds like that such that you win at least one or two of them.

Since you have 25% chance to win, you'd multiple 25% times 1000% which means your "Expected" winnings is still a cool 250%.

So to be sure, high risk stocks is gambling much like in a casino, but the odds are probably more in your favor overall.

Just to avoid major problems, you'd still probably want to invest a healthy amount in "safer" stocks, just so if something goes horribly wrong you don't lose "everything". But I'm at a fairly young age. Now is the time to take these massive risks IMO... Because you surely don't wanna take huge risks when you're older...
 
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Inaut

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I'm 100% invested in high risk stocks... had some wins, more then a few losses but still playing the game.. It's funny because I don't even fear the loss of money and never considered it gambling...Provided due diligence is done....

Still not retired but "hoping" to get there this year....
 
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Cirion

Cirion

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Nice, would you be willing to share some of your lessons learned? Like...

How quickly have you accumulated gains overall? Just curious what I can realistically expect from someone in the trenches so to speak.
How many unique stocks are you invested in, at any given point in time?
Have you learned any tips to better spot which stocks are more likely to rebound than others?
 

LeeLemonoil

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I‘ve favoured a more conservative approach of investment the last ~12 years, mostly with ETFs.
Every month newly tailored ETFs enter the market, some are very well composed.

If you’re not adverse to high risk maybe betting in sports is an alternative. I‘m sure there a many models already thought out that potentially lead to high gains simultaneously to high risk
 

sebastian_r

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I make a living from trading.
Scale in and out of trades.
Let your winners run.
Cut losses immediately.
Don't think that you're smarter than the market, there is a reason that something out or underperforms the index.
Trade the trend, it's the easiest way to be profitable.
Don't try to pick bottom or top. Something that looks cheap after a big dump can lose you 90% in a heartbeat.
Don't try to predict the future, rather trade moves / trends and try to get the meat of it.
Become an expert in one asset class.
Diversification is for people who don't know what they are doing. A basket of terrible or mediocre stocks doesn't protect you from anything. All it does is taking from your winners.
Don't short US Equities.
Look into cryptocurrency.
Look into new industrial revolution - AI, 3dPrinting, Automation & Robotics, Nanotechnologie, Biotechnologie and Genomes
Read New Market Wizards and Stan Weinstein's Secrets For Profiting in Bull and Bear Markets.
 
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Inaut

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Nice, would you be willing to share some of your lessons learned? Like...

I make a living from trading.
Scale in and out of trades.
Let your winners run.
Cut losses immediately.
Don't think that you're smarter than the market, there is a reason that something out or underperforms the index.
Trade the trend, it's the easiest way to be profitable.
Don't try to pick bottom or top. Something that looks cheap after a big dump can lose you 90% in a heartbeat.
Don't try to predict the future, rather trade moves / trends and try to get the meat of it.
Become an expert in one asset class.
Diversification is for people who don't know what they are doing. A basket of terrible or mediocre stocks doesn't protect you from anything. All it does is taking from your winners.
Don't short US Equities.
Look into cryptocurrency.
Look into new industrial revolution - AI, 3dPrinting, Automation & Robotics, Nanotechnologie, Biotechnologie and Genomes
Read New Market Wizards and Stan Weinstein's Secrets For Profiting in Bull and Bear Markets.

pretty solid advice from @sebastian_r

I think the biggest lesson i've learned is don't get too greedy. take profits when you can. I've left a ton of money on the table thinking stocks will continue to rise and also lost money because I held too long...With the way penny stocks are these days, pumps only last so long until traders move on to the next hot topic, get in and get out unless you are confident.. It's always nice to ride free shares.

Personally, I'm interested in the mining and resource sector so I focus my attention there. (not a great market to be in for the most part but money can be made)
 

JudiBlueHen

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You might enjoy a book by Nassim Nicholas Taleb, if you haven't already his work, such as "Fooled by Randomness". It is an older book and he has written others since, but he is a famous trader adept in risk and statistics. I happen to have bought small positions in GE and F recently. A few years ago I bought TGT when it had a big drop and did well with that trade. But I'm mostly in the Safe Mode now (if there is such a thing...and of that I am not convinced!).
 

Inaut

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Now that you brought up books... I like the book Nobody Knows Anything by Bob Moriarty, an old time resource investor. Simple insights but very useful
 

tankasnowgod

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Since you have 25% chance to win, you'd multiple 25% times 1000% which means your "Expected" winnings is still a cool 250%.

If you had purchased Litecoin at $35 earlier this year, you could have 250% of your original investment at this moment (a 2.5x). That wasn't the low, either. The recent swing low was in December at 22.20. It hovered below that 35 dollar mark for almost three months.

I don't know the float or outstanding shares on GE, but I somewhat doubt that you'll make those kinds of numbers with a company that is as old and established as they are. It takes a long time for an org that big to do much of anything, and I bet the float (number of outstanding shares) is huge on that company. It could take years or decades to make the numbers you mentioned, if it does it at all. Although, companies like that can still fall quick. The bull climbs the mountain, the bear jumps off a cliff.

Whatever you do and whatever market you choose, get yourself a solid trading mentor. One that your can really stick with for a while. That's the best thing I've done. I've seen you jump around from various ideas about health and diet a lot the past few months, and if you do that with trading, you can be sure you'll blow out your account.
 
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Cirion

Cirion

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Big companies can indeed make huge jumps. For example, Boeing was like $70 ish a share in 2012. It climbed up to $440 a share by the end of 2018 or so, though of course 2019 hasn't been the best year for Boeing because of the 737 MAX incident. Just saying though.

I wouldn't mind getting a trader mentor though. That does sound like a good idea. Though I'm not sure comparing it to health is a fair thing =P Health is a far more complex subject than trading... (BTW I have gotten many health mentors and they didn't get me where I wanted to be either... As an aside to that point, Mentors are no guarantee no matter the subject at hand...) Where did you look for a reputable mentor tho? Not knowing much at all about these things, it probably is a good idea to at least start off with one.

I will probably look into reading the book suggestions also.
 

tankasnowgod

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Big companies can indeed make huge jumps. For example, Boeing was like $70 ish a share in 2012. It climbed up to $440 a share by the end of 2018 or so, though of course 2019 hasn't been the best year for Boeing because of the 737 MAX incident. Just saying though.

You're comparing a 6.2x over six years to a 2.5x over 3 months.
 
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Cirion

Cirion

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You're comparing a 6.2x over six years to a 2.5x over 3 months.

Yeah that's fair, but it's still far quicker of a return than going for the typical 5-10% slower rate gains. That's ultimately my goal. 6x over six years is still insanely impressive and more than enough to retire from depending how much you invested (My financial advisor told me in fact that someone bet all his money on Boeing stock and retired off of it). But yeah, 2.5x over 3 months is very good for sure, and you're right, is better if you can manage to find the right stocks to accomplish that for sure.

@fractal

I have my 401k and health savings accounts, both of which are my more "stable" growth stocks (5-10%) and I don't really screw around with those, I go for the stable rate of returns there. My separate brokerage account is where I am planning to have some fun with. I plan to use my health savings account to fund health insurance in retirement. It's great because it has multiple tax benefits to it. Put it in the HSA pre-tax (tax deductible), growth is tax free (no capital gains), and tax-free dispersal (as long as you use it for medical expenses only).
 

sunraiser

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If you’re not adverse to high risk maybe betting in sports is an alternative. I‘m sure there a many models already thought out that potentially lead to high gains simultaneously to high risk

If you're going high risk then surely sports betting would make more sense?

Not only do you have access to trends but also direct visible insight into actual form and current culture. A fair amount of info beyond trend data that you'd have when investing.

I don't trade, this is just out of curiosity as opposed to challenging an idea; but: If you're going moderate to high risk then why play with stocks instead of careful sports betting (using a legit model)??
 

HealingBoy

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I am waiting to buy crypto, soon. Not now, current rise is a corrective one. I'm expecting 3k and less for BTCUSD. Then, accumulate... and come back in 2020, 2021.
I'm putting a lot of hope in this.
 

postman

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Don't play with money you can't afford to lose. Crypto is the highest risk highest reward market, PM me if you want a referral code to a good and easy to use regulated cryptocurrency exchange.
 

ddjd

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where can i learn the ropes regarding this kind of thing
 

Makrosky

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I am waiting to buy crypto, soon. Not now, current rise is a corrective one. I'm expecting 3k and less for BTCUSD. Then, accumulate... and come back in 2020, 2021.
I'm putting a lot of hope in this.
Do you think it is going to get to 20k again ever again?? It looks... flat...cold.... DEAD.
 

tankasnowgod

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Do you think it is going to get to 20k again ever again?? It looks... flat...cold.... DEAD.

Dead? What are you basing that on? Certainly not the current volume....

In answer to your first question in regards to BTC, I do, and I think it will happen a lot quicker than people think. But that is just my opinion.
 
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Makrosky

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Dead? What are you basing that on? Certainly not the current volume....

In answer to your first question in regards to BTC, I do, and I think it will happen a lot quicker than people think. But that is just my opinion.
Yeah not on volume, of course. But that's not a guarantee that it will not keep going down.. as it is doing now... till reaching its real value : 0

Don't get me wrong I have money invested there, I wish it would go up again.

And yeah I want to hear opinions here, that's all, there's no way anyone knows anything about the future of BTC.
 

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