Eric Sprott may be Canada's answer to Warren Buffet. He's got the Midas Touch and currently manages more than $3 billion. We talked to Eric Sprott about uranium and why he is bullish on nuclear energy. Interviewer: Uranium had been inching higher from 2001 until a year ago. Since then, it has soared up the price chart. What is a realistic price for uranium and how high can you envision it reaching? Eric Sprott: There is obviously a shortage between current mine production and current uranium consumption. In order to correct that imbalance, it would have to be economic to open up new deposits. I’m not suggesting that it (uranium) has to go to $100 to become economic. I don’t think that’s true. Probably at $50, it becomes very economic. The reality is that we’ve been so slow in getting started that I think the whole nuclear industry will ultimately prove to be the key energy source of the future. With demand today at 170 million (pounds), who knows? It might be 300 million pounds in twenty years. The argument in the article we wrote is that based on the previous peaks, prices if you put a normal inflation rate on it, it would equate to something like $100. So, it’s not that far fetched that we might get there. Interviewer: If it takes four or five years, or up to a decade, to get a nuclear reactor going, why are the Chinese building so many so quickly? Eric Sprott: Because they’ve been doing it right. One of the nice things about a centrally organized government is they deal with big issues. Obviously, China has a big issue in energy. If you were sitting over there, you would realize, ‘My god, we’re starting to import two million barrels of oil. We used to export coal and now we don’t export coal. What are we going to do if our growth rate continues to grow at eight or nine percent per year? How much power are we going to need? And where is it all going to come from when there are already shortages of the two most commonly used energy sources in the country?" The option you fall back on is, ‘Well, let’s go nuclear. We have to go into all of them.’ And of course, now they’re predicting two nuclear reactors every year for the next ten years. Who knows? Maybe five years from now, that will be four reactors every year. Perhaps when we all realize the extent of the energy shortage. Interviewer: How is this going to be sold to North America and Europe in the wake of Three Mile Island and Chernobyl? Eric Sprott: The way things might change is now that we have $50 oil, and the price is almost going up in an unlimited fashion. Now that we’ve got coal at double and uranium that’s gone up, people might finally realize there is not an infinite supply of certain things that we rely on. And that we might have to take a more pragmatic view of the nuclear option. I’m sure that is exactly what certain countries, including Japan, China and France, have done. The other thing is that there is a new reactor where you can’t have a meltdown. I’m not technically strong enough to explain it. The uranium is in graphite spheres, and they won’t melt down unless temperatures reach 2000 degrees. The highest it ever goes to is 1600 degrees so it’s just not going to melt down. It doesn’t matter if things are out of control. They won’t break down. If that kind of assurance were accepted by the public – if someone could prove that that was the case – I think the nuclear option would be an incredibly viable option. Another thing that would make people think differently would be having brownouts for a while, or hyperinflation because of the shortage of coal, natural gas, and diesel fuel. If we had brownouts for a while, and of course they have brownouts in China, which is probably why they are proactive in moving nuclear along. Interviewer: How realistic is the global energy crisis moving toward a Hubbert’s Peak, an energy scenario from the year 1970? Eric Sprott: My view is that it seems very realistic. I think it is very important that we do go back to 1970. Look at the fact that Hubbert said in 1956 that 1970 will forever peak out (in terms of energy production). Lo and behold, it peaked out! It almost goes down every week in the United States. Almost every week, there is a little less production. This is now with very high oil prices. It looks like his theory, for the geographical area called the United States, worked. Do we think it is going to work in the world? I tend to believe it is. I believe there are projections for Great Britain, which I think are at about 4.2 million barrels/day right now, that in ten years from now, will be down to 700,000. That’s what happens when fields go into decline. They go down, and you can not resuscitate them. Everyone who studies the topic knows that no significant discoveries have been made since the 1960s. What I mean by significant are giant oil fields – like Ghawar. For example, people now consider a 100-million barrel field a big deal, and 500 million is great. Well, one hundred million is like 1.2 days of world’s supply, and 500 million is eight days supply. You have got to find a lot of those every year. We don’t find them. We have hardly found anything. The Caspian Sea? I am guessing it is 500 to 700 million. It’s the one thing we point to, the thing in the Caspian Sea, which we have been pointing to for the last three years. Let’s say it is 800 million barrels, it is ten days’ supply. It’s nothing. Interviewer: There have been some pretty incredible estimates as to how high oil can go. The highest we’re read of stands at $182 for a barrel of oil and $15 per gallon of gasoline. Your comments? Eric Sprott: When you get into any commodity, where there is a bonafide shortage, there is no limit on the price. There is hardly any limit on the price. Because that last guy still wants that last barrel of oil. I always say, when a commodity is starting to break loose, ‘Never put a ceiling on it because you never know where it is going to go.’ You look at what is going on in the world oil situation. If I was (in charge of ) certain countries, I would probably be changing what I’m doing. You can see China going throughout the world signing agreements with countries to assure oil supplies. It’s a government mandate to go out and secure their supplies. I think people at the government level realize, ‘We have issues here that we have to solve. If we don’t have assurance of supply, what happens?’ One thing about Hubbert’s Peak that most people don’t go to is the economic impact. Forget the price of oil. What if we produce 83 million barrels today, and in 25 years we have 55 million barrels? What is the world going to do? Do we just have to shut down economies because we don’t have a replacement for hydrocarbons? Interviewer: Do you think the world governments are prepared for this? Eric Sprott: Not at all. They show no interest. In fact, I would say one of the real problems with the democratic process is, unfortunately, too much time is spent thinking about politics. Hardly any time is spent planning for the future. Interviewer: On uranium, you recommended a number of uranium companies in your special report. Cameco (NYSE: CCJ) seems to be the one many recommend. Other uranium companies seem to be in the exploration or the more speculative category, and now have some momentum because of the bull market in uranium. How strong are the fundamentals in those companies? Eric Sprott: I think the fundamentals for some of the companies are spectacular, quite frankly. It’s interesting for us because we had the same thing happen in gold, when the price of gold was $250. We tried to imagine what we should buy if, and when, gold went to $400, which we thought it would, or $500 or higher. The real opportunity always lay in, ‘We’ll find someone who has a large resource that is uneconomic today, but if you move the price up, it becomes quite economic.’ I would say Strathmore (TSX-V: STM). They have a large resource already identified. In fact, they are acquiring properties all the time that were identified years and years ago. Yet, at $20/pound uranium, they probably don’t make any sense. But, at $40/pound uranium, they are likely to make tremendous economic sense. Of course, the value of the shares can almost – not go up exponentially – but they can go up a lot. You finally tip over that breakeven level, and everything after that is profit. We had an analogy like that in gold area, where one guy went out and bought all these deposits that would make sense at $400 gold. The stock has been a tremendous winner. I think it is up 500 percent. I think the same can happen in uranium. That’s why we go to Strathmore and UEX (TSX: UEX). There are a couple drilling in Saskatchewan: JNR Resources (TSX-V: JNN) and International Uranium Corporation (TSX: IUC). Interviewer: How do you feel about precious metals? Eric Sprott: We feel pretty good about precious metals. We’ve been pretty bullish for quite a while now. We have liked the fundamentals for gold for a long time for any one of ten different reasons. The one reason I fall back on, that gives me tremendous comfort, is the fact the world consumes 4,000 tons of gold per year, but mine production is 2,500. Anybody who uses any bit of logic knows, in due course, the price will go up to reflect the imbalance between demand and supply. I don’t care how much gold Central Banks sell, ultimately they are going to have no gold. I think people realize that Central Banks have made a big mistake selling their gold. Interviewer: The China card keeps driving global commodities as they bring their country more technology. How do you feel about the base metals? Eric Sprott: We haven’t really gotten involved in the base metals. One of the reason we haven’t gone there is we have believed we are in a secular bear market, and there could be a financial implosion. In that kind of scenario the base metals don’t do well. But the precious metals can provide safety. That’s the distinguishing mark we make between the two. On the China thesis, the demand for all of these things would go up. Our problem is we still expect some fallout in the financial arena, which ultimately would even affect China. We feel more comfortable with the precious metals, and we feel more comfortable with energy. Simply, energy demand in an economic implosion is pretty inelastic. It doesn’t fall off the table. Demand for zinc, lead, copper, and aluminum can fall quite precipitously if there was an economic slowdown. Interviewer: Are you expecting an economic slowdown? Eric Sprott: Absolutely, yes. We might be in it now. There are certainly lots of signs that there is not much robustness in the U. S. economy. I have some very strong views as to what should ultimately happen in the U. S. My views are predicated on the fact that the government reports a deficit of $400 billion, but there are also government reports that suggest, on a GAAP accounting basis, that the true deficit in 2003 was $3.4 trillion. We can all ignore it, and everyone has ignored it. But, the reality is that the liabilities are accruing for Social Security and Medicare in the U. S. at a tremendous rate. There has been no provision for it. There was a paper released by the U. S. Treasury Department about a year ago that said the present value of their obligations, that are not funded, is $44 trillion. Again, we can choose to believe it or not believe it. I happen to believe it. I made the point that politicians are in it to be re-elected, and they are not dealing with the real issue. The real issue is they are making promises to their citizens that they can’t keep. And they’re not going to keep them. I would hate to be a retired person or a young person in the U. S. Somebody is going to have to bear the brunt of all these funding issues that haven’t been taken care of. Beginning in 2008, the baby boomers start collecting these things. That’s a real cash problem. Before, it was just a bookkeeping problem. You’ll have a huge influx of people collecting their Social Security and getting free Medicare. It’s got to be funded. Anyone who’s looked at the problem has agreed that no one has done anything about funding it. You have to cut what your promises were, which is what all the European governments are now trying to do. They’re all cutting back on the pension. Most companies are cutting back on them because they can’t fund them. The trend is in place here: What we thought we were going to get, we’re not going to get it. Am I bearish? Gosh, we’ve had forty years of living off of savings that were supposed to be saved to provide this future. It was all spent. Everyone just chooses to ignore it. Eric Sprott Founder and Chairman of Sprott Securities Inc., Toronto, one of Canada's consistently top-ranked investment firms. After earning his designation as a Chartered Accountant, Eric entered the investment industry working in research as well as institutional sales. In 1981, Eric founded Sprott Securities Limited (now Sprott Securities Inc.) which, under Eric's leadership, has become one of the most successful investment firms in Canada. Eric Sprott has established himself as a clear leader in Canada's investment community. With over 30 years of industry experience, his expertise at making predictions on the market and recognizing investment opportunities with superior growth potential have been proven many times over. His investment abilities are clearly demonstrated by the excellent performance track record of Sprott Managed Accounts, Sprott Canadian Equity Fund and the Sprott Hedge Fund L. P. At the 2003 graduation, Eric Sprott, President, Sprott Securities Ltd. and Carleton alumnus for whom the Sprott School of Business was named after, was awarded a Doctor of Laws, honoris causa by Carleton University in recognition of an outstanding career as an entrepreneur, investor and philanthropist.
As small investors look for ways to ensure a good return on their money, land sales are increasing in popularity. Profits, whilst not guaranteed, are often better than those from the stock market, for several reasons: Less risk, more profit Whilst some investors have a significant investment in the stock market, often with a comprehensive, well-managed portfolio, for most smaller investors, their experience of the market is limited to one or two companies and they are therefore more open to stock market fluctuations and riskspany share prices can be affected by many external factors, often beyond the company’s control and, unless you are watching the market carefully day by day, you usually have to hold onto your shares for many years in order to turn a good profit. By contrast, if you select the right land, or take the advice of a reliable land agent, you can realise potentially fantastic profits in a much shorter space of time. This is because the land that’s normally made available to smaller investors has been carefully chosen. Big land investors buy and then bank land that they think will be ear-marked for development in the future, and then either hold onto it, or parcel it up and sell it to private investors, who reap the benefits if planning permission is granted at a later date. No maintenance required Once you’ve bought your piece of land, you own it outright and can sell it whenever you choose. You don’t need to maintain it as you would a property and you don’t need to follow its fortunes day in, day out, to find out whether you’re making any money. If you need to raise money, you can sell your land quickly, whereas if your shares are at a low price, you won’t be able to make enough cash. The best of both worlds If you have thought of investing in land, but don’t want to get out of the stock market completely, then just broaden your portfolio by reducing your shareholdings and investing in land as well. You get the best of both worlds, and the chance to make a very health profit if you choose the land wisely.
Stock trading has numerous benefits as a viable part time occupation. In contrast to a second job, there are no special qualifications to begin. The stock market doesn’t care about your level of success, education, ethnic origin or any personal characteristicsplex employers, office politics or difficult employees do not play a part in trading. Additionally you have the freedom to trade from any location. If you follow a few simple rules you can run your business on your own terms. The most important factor is to be clear about why you want to trade stocks. What do you hope to gain financially from learning to trade? Are you looking to: 1. Create an enhanced lifestyle with supplemental income? 2. Replace a full time income with a passive income stream? 3. Become independently wealthy by creating a financial base independent of other income sources? What would being a successful trader mean you? Imagine yourself making successful trades and gaining financially. Think about what it would feel like to have extra money in your bank account and to achieve your targets. With a clear picture of what you want and how that would feel you will be able to remain focused and motivated. Your first task. Your first task is to put one primary goal for your trading plan in writing. Additional goals you set can then support your primary plan. Know Yourself As well as learning to trade stocks it is essential that you understand yow you react under stress. Being aware of your own behaviour patterns and common causes of and reactions to stress when trading will help you to master stock trading. The reason that many people lose money in the stock market is because they lack the proper knowledge base. Independent of trading styles there is one thing common to all successful traders; the use of a tested and proven system. In learing to trade you must be willing to let go of pre-formulated ideas and start fresh, develop new successful habits, and the discipline necessary to trade successfully over time. Are you willing to do this? Successful stock market trading eludes many people because they don’t have contact with an experienced, successful trader or trading system that actually works. Going it alone can be potentially expensive when learning by trial and error. Investing in a solid education and taking advantage of the insights and experience of successful trader makes a lot of sense when learning to trade successfully.
Copyright 2006 Equitrend, Inc. It’s important that you understand the impact that a bear market has on your capital. The give and take of your investment capital is not equal. If you placed $100 into an investment and it declined 50% to $50, what is the rate of return you would need to earn back your original investment of $100? Once you lose money, it takes a much greater return on the funds you have left to recapture your original investment. In this case, you would need a 100% gain on the remaining $50 to recapture your original $100 investment. Looking at historical bear markets in the United States, we can conclude that the time to recovery from a bear market can take between six months and twenty five years! Declines in portfolio value have ranged from 20% to 86.7%! Not a good scenario for buy and hold investors. This is why you would be better off financially to never lose money in any one year and to only achieve half of the market’s returns in the positive years. Let us explain how this is possible. If you never lost money in the down market years, you would only need to capture 38.33% of the gains in the positive market years to equal a buy-and-hold position in the Nasdaq 100 index. More realistically, if your losses in the down market years were half the Nasdaq’s losses, you would only need to capture 63.37% of the Nasdaq's gains in the positive market years to equal a buy-and-hold position. The point we are making is that you don’t need to equal or outperform the performance of the market in the positive market years if you protect your capital in the down market years. Protecting your capital in the down market years has an exponential effect on growing your capital over time. The objective of any stock market timing strategy should be to reduce risk and maximize returns - with risk reduction being the most important factor. All other things being equal, you want to invest in the least volatile, highest reward, lowest risk strategy possible. You may be reading this today because you are tired of giving all of your own assets, or your client’s assets, away to a bear market. You may even be in the position where your retirement has been diminished to the point of having to change your retirement plans. Whatever the reason, there are better ways to grow and protect your assets than the buy and hold (buy and hope) myth promoted by Wall Street.
A Renowned Exploration Geologist Is Pursuing Another Major Uranium Deposit in Saskatchewan’s Athabasca Basin In late January, Cameco Corp’s director of advanced exploration tantalized the audience at Vancouver’s Minerals Exploration Roundup, discussing the geology, and especially the size, of his company’s Millennium uranium deposit. Drill indicated resources are estimated at 449,000 tonnes with a grade of 4.63 percent uranium oxide. Additional tonnage is inferred at the lesser grade of 1.81 percent, but still a respectable grade by anyone’s calculations (one percent of uranium oxide is reportedly comparable to about 50 grams of gold). Because of soaring spot uranium prices, this deposit’s gross value might someday conceivably exceed $2.4 billion. “The geological setting of the Key Lake Road shear zone is quite similar to the Millennium deposit,” Dr. Boen Tan told StockInterview. “The Key Lake Road shear zone is located within the same north-northeastern structural trend as the Millennium deposit.” Cameco’s (NYSE: CCJ) director of advanced exploration, Charles Roy, called the Millennium uranium deposit, “the most significant new basement discovery in more than 30 years.” News reports suggest the Millennium discovery could host a resource of 57 million pounds of uranium oxide. The Millennium deposit is located north of the former world-class Key Lake uranium mine and south of two of the world’s highest grade uranium deposits, McArthur River and Cigar Lake. So why is Dr. Tan evaluating a relatively early stage exploration project against one of the world’s most recent and highly lucrative uranium discoveries? Most junior companies exploring in Canada’s Athabasca Basin, or for that matter any junior natural resource company, are unduly sanguine about measuring their property’s exploration prospects in relation to a major, often recently discovered, world-class deposit. All too frequently such “closeology” (“we’re close to the big deposit so we can find an elephant, too) comparisons are deceptive and misleading. In many investment circles, it has become a clichй. However, when the comparison comes from a highly regarded exploration geologist, such as Boen Tan, one should pay attention. Especially when Dr. Tan talks about his geological insights regarding the greater Key Lake area. Dr. Tan was the Uranerz project geologist for uranium exploration at Key Lake in the early 1970s. His exploration work led to the discovery of the Gaertner deposit (1975) and the Deilmann deposit (1976) in the Key Lake area. According to a recent Northern Miner article, “It was not until the discovery of the Deilmann and Gaertner deposits at Key Lake that the true unconformity type uranium deposit model was first recognized.” Dr. Tan also supervised the definition drillings of these two deposits until 1978. According to the Uranium Information Centre, Key Lake once produced about 15 percent of the world’s uranium mined. Over Dr. Tan’s long career, he was also fortunate to have evaluated some of the world’s largest uranium deposits in the Athabasca Basin, which had been previously co-owned by Uranerz. These include the Key Lake deposits, the Rabbit Lake deposits (including Eagle Point, A-, B - and C-Zone, and the McArthur River deposits). Comparisons between the Key Lake Road Project and Cameco Corp’s Millennium Uranium Deposit Asked about his opinion of Forum Development’s Key Lake Road project, for which Dr. Tan is the chief geologist, “We have the right lithology, the right structure and, on top of that, we have uranium mineralization.” Dr. Tan was impressed with the amount of uranium mineralization scattered with the graphitic metapelites. “It is very seldom you find such a lot of uranium mineralization there,” he explained. Again, he compared that with exploration around the Key Lake deposit where he remarked, “The graphitic metapelites at the hanging wall of the Key Lake deposit had as much as 4,000 parts per million of uranium.” It’s an optimistic sign in preparation for a summer drilling program. Let’s look at Dr. Tan’s geological comparisons between Cameco’s mammoth Millennium uranium deposit and the exploration he is overseeing for Forum Development’s Key Lake Road project. 1. Athabasca’s eastern basin is comprised of Archean granitoid gneisses and Paleoproterozoic metasedimentary rocks. Dr Tan wrote, “Both the Lower Proterozoic rocks and the Archean granitoid rocks occur within the KLR shear zone in similar geological setting (along the north-south structural trend,) as the Millennium deposit.” 2. The Millennium’s main uranium zone occurs in a pelitic to semi-pelitic stratigraphic assemblage of gneisses and schists. Asked about the drill targets on the Key Lake Road project, Dr. Tan responded, “The targets are in the pelitic stratigraphic assemblage at depth which includes the same graphitic pelitic gneiss and the calc-silicate which host the uranium mineralization in the Millennium Deposit.” 3. Cameco’s geophysical surveys indicated the presence of a significant resistivity low centered over the uranium mineralization. Dr. Tan explained, “Forum did airborne VTEM (electromagnetic survey) and multiple parallel EM conductors of over 40 kilometers long were outlined. Last year’s radiometric prospecting was carried out and several uranium showings (from 0.1 to over 5 percent uranium) were found in the graphitic metapelites, calc-silicate and pegmatites along this 40 km conductive trend.” 4. The Millennium deposit features extensive hydrothermal alteration over the lithology. The uranium mineralization was associated with dark chlorite and illite, and with a distal halo that included sericite. Dr. Tan remarked, “In the Key Lake Road area, we did observe moderate clay alteration in the fractured and brecciated calc-silicates and pelitic gneiss which appear to be chlorite and sericite. In 1980’s five reconnaissance holes were drilled in the area and chlorite alteration in the meta-pelites was reported from the drill cores. In a project Forum has scheduled for drilling this winter, Dr. Tan pointed out, “In the Costigan Lake area clay alteration in the pelitic gneiss were intersected in several holes. One drill hole intersected uranium mineralization of 0.43% U3O8 in 0.36 m of clay altered graphitic pelitic gneiss.” 5. The Millennium deposit’s ore mineralogy is comprised of pitchblende, with lesser amounts of coffinite and uraninite. Dr. Tan discussed the comparative mineralogy, saying, “We found uraninites in the calc-silicates which occur as fine to coarse disseminated grains and as nuggets up to 2 centimeters in diameter (over 5 percent uranium). Fine grained uranium mineralization (up to 0.6 percent U) found in the fractured graphitic meta-pelite appear to be secondary uranium mineral.” In the Key Lake Road’s “Molly Zone,” Dr. Tan indicated, “Uranium mineralization was found within the calc-silicates and pegmatites along the shear zone. The calc-silicates contained up to 5 percent uranium with visible pitchblende” He also pointed out that at Forum’s Maurice Point project, which the company may drill in 2007, “the prospector discovered a zone of mineralization of 100 by 10 meters wide with uranium mineralization from 1 percent up to 7 percent uranium in an outcrop.” 6. Finally, Dr. Tan explained, “Because all the unconformity uranium deposits in the Athabasca Basin, such as the Millennium, Key Lake and McArthur, always have lots of boron. That is indication of the hydrothermal diagenetic ore-forming process. Do any of Forum’s properties show boron? Dr. Tan said, “The Beach Zone in the Maurice Point project has high boron elements. On top of the good uranium grades, yes, that is the extra special thing. Because it is characteristic for a hydrothermal uranium deposit in Athabasca, like Key Lake. It’s a good indication like pathfinder elements.” Evaluation of Forum Development’s Exploration Prospects As with any early exploration project, additional drilling helps define the property’s potential. Many of Dr. Tan’s comparisons, while valid, require drilling the most promising targets. Asked about what questions that drilling the Key Lake Road project might answer, Dr. Tan responded, “If the uranium is deposited under hot water, in a hydrothermal environment around 300 degrees, if you don’t see the uranium during drilling, you want to see the rock alteration, the pathfinder geochemistry, the boron, and elevated uranium.” He also pointed out the most obvious answer you want to see during a drill program, “The thing you want to see in drilling is to see some uranium.” Some might consider Forum Development Corp’s relatively shallow drilling approach with hesitation. The company plans drill holes between 150 and 200 meters deep, not the 700 meters usually drilled in the Athabasca Basin. Forum’s Chief Executive Rick Mazur, who is also a geoscientist, saw the positive side to that philosophy, calling his exploration model “unique” (which it is). He added, “The Key Lake project was a concept where we were looking for near or at surface mineralization. We acquired ground just outside the erosional context of the Athabasca sandstone, where we believe that basement hosted deposits could be found at or near surface.” Expensive drilling in the Athabasca Basin can break any junior uranium exploration company’s bank. Financing for these drill programs can run into the millions. Exploration can take years. Investors should note that deep drilling into hundreds of meters of overburden can quickly drain a company’s exploration budget. Mazur explained, “We are fortunate enough to have rock exposed on surface, and not covered with 400 to 800 meters of Athabasca sandstone.” What is Forum’s advantage for shallow drilling? “We can go in there and with a very cost-effective program of geological mapping and prospecting, evaluate areas on our property where uranium mineralization has already been discovered in detail,” Mazur concluded. David Scott, an eResearch geological analyst, issued a speculative buy recommendation on Forum Development Corporation (TSX: FDC) in October, 2005, and wrote the company “has an excellent management and advisory team with decades of experience in the Basin. They have staked two well-positioned properties and have moved quickly to explore them.” eResearch set a 12-month target price of C$0.60/share on FDC shares, with a potential target price of C$0.90/share “if the company continues to get good results in the Athabasca Basin.” The analyst re-iterated the speculative buy recommendation on February 13th with the target price of C$0.60/share. The analyst based his investment opinion and price target by comparing Forum Development against “peer group” junior uranium exploration companies. Valuation was arrived at his price target by comparing Forum Development in terms of (a) similar-sized uranium exploration companies and (b) uranium exploration companies with properties next to Forum Development. FDC shares traded between C$0.40 and C$0.50/share during February. Snapshot: Dr. Boen Tan Dr. Boen Tan is a member of the Association of Professional Engineers and Geoscientists of Saskatchewan, and possesses over twenty-five years of uranium exploration experience. Dr. Tan joined Uranerz, a private German company, in 1969 and after a number of years as a field geologist in Germany and Australia, moved to Canada in 1973 as a senior geologist and Project Manager for Uranerz Exploration & Mining Ltd. (UEM), conducting uranium exploration in the Athabasca Basin. Dr. Tan was instrumental in the discovery of the Key Lake uranium deposit and the development of the Key Lake Mine which produced 195 million pounds of U3O8 at a grade of 2.5% over a fifteen year mine life from 1983 to 1997. After the development of the Key Lake Mine, Dr. Tan continued to supervise UEM's uranium exploration and drilling programs in the Athabasca Basin, including regional exploration in the greater Key Lake area. Dr. Tan monitored the exploration and diamond drilling of UEM's joint ventures with Cameco Corporation at the McArthur River, Maurice Bay, Millennium and Rabbit Lake deposits until all uranium property and project interests were sold to Cameco in 1998.
SIX STEPS and the IRREFUTABLE LAWS of the MARKET Every Investor and Trader MUST KNOW to Succeed Step 1: A move begins with the sponsors (smart traders) who have insider knowledge as it relates to a particular stock or market. This information will move a market up or down depending on the insiders' information. These buyers are smart, very smart, and recognize trading/investment opportunities very early in the markup cycle. Step 2: Days, weeks, or sometimes months after a move has started, there is a brief mention in the electronic media (radio, cable, TV) or on one of the internet chat boards that a market has moved. The public hears for the first time and begins to get interested, but does not buy. Step 3: A blurb of information appears in print media. The move also begins getting more exposure on blogs and internet message boards. The public starts paying a little more attention, and will buy a little bit. Step 4: Wall Street and LaSalle Street brokers go into full hype mode and hawk the market to their customers. The public begins buying in greater volume. Step 5: A full-blown front-page article appears about the particular stock or market in one of the major financial newspapers, magazines, or financial websites. This is often six months after the fact and after a market has shown its greatest appreciation. There is often heavy public buying, even a possible frenzy, as all media, brokers, and so-called "gurus" start to tout the market. Step 6: As step 5 gets underway, the sponsors or smart traders begin to move out of the market and take their profits off the table. The finale: The move ends, the market falls, and investors lose money.
We often hear that 95% of people who try trading for a living fail within the first year. These are not very good odds and it is natural for new traders to wonder if they have what it takes. In this issue, I give you a list of 20 characteristics I believe could be found in most winners. I also included some Truths about trading. The methods employed by winning traders are extraordinarily diverse. Despite the broad spectrum of traders, certain characteristics are found in most winning traders (in no specific order): - Winners have a trading plan with a strategy that incorporates effective money management. They have the discipline to execute their plan relatively flawlessly and the self esteem to accept the money the market gives them. - They use their head and stay calm – they don’t get excited or depressed because of their trades. They don’t act on emotions. They can handle success and failure without self-destructing. - They don’t trade to feel good or to get high. - They handle trading as a serious intellectual pursuit. - They always protect their capital because they know they cannot trade without it. This means that they don’t get caught up in the thrill of the moment, the excitement of a running stock – they don’t jump into careless trades. - They love trading, trading is a passion and they spend a large portion of their time trading and learning about trading. - They know that sometimes the best thing to do is to do nothing (sit on their hands). They do nothing unless there is something to do. - They don’t pay attention to other people’s opinions, they make their own. - They don’t try to guess the future - they know it is a game of probabilities. They understand that they will always have a percentage of losing trades but they keep the losses for those trades small. They don’t hesitate to get rid of a position when the loss is still small. - They have a great respect for the markets and they never think taking money from it is easy. - They behave like professionals. They take full responsibility for their actions and don’t look for something or someone to blame. Instead they use their losses as an opportunity to improve their plan. - They trade to trade well, not for the money. - While they are in a play, they don’t count how much money they have made or lost because they know this would influence their judgment. They focus on trading well. - Amateurs keep thinking what trades to get into, while professionals spend just as much time figuring out their exits. - When they have a winning position, they don’t let their emotions dictate when to close the position, which would result in small gains. They know emotions cannot be part of the decisions. - When they enter a play, they don’t have any expectation. They understand it can go either way and that nobody can know the future. - They have confidence in their plan, patience, and discipline. - They are not afraid because they have developed attitudes that prevent them from getting reckless. - They have self-monitoring skills and can continuously monitor their performance in order to improve it. Some Truths about Trading - The market is a huge crowd of people. Each member of the crowd tries to take money away from other members by outsmarting them. Everyone, including some of the brightest minds in the world, is against me and I am against everyone. It’s every man for himself. The money I want to make belongs to other people who have no intention of giving it to me. - The market is like an ocean, it moves up and down regardless of what I want. The market does not know I exist and I cannot influence it. I cannot control the market any more than a sailor can control the ocean, but I can control my own behavior. - Trading is all about management – managing myself, my money, my attitude, and my positions. It is not about predictions, forecasts or opinions. - There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily or sufficient knowledge to make his play an intelligent play (Jesse Livermore). - Trading without imagination is like painting by numbers – and is about as rewarding(William R. Gallacher). - The market is not going to reward anyone for observing the obvious. - A mistake made by many traders is that they become so involved in trying to catch the minor market swings (generating lots of commissions in the process) that they miss the major price moves. - Advisors are only wrong when you get too many of them start thinking the same thing. - A strategy to enter and exit trades will not help you unless you are both disciplined and organized.
One say's "I bought "XYZ Company" at Rs.2200 and immediately after I bought the stock price dropped to Rs.2000." I feel sad. Another comes with a different version "I sold "XYZ Company" at Rs.2000 and it went up to Rs.2400 same evening" I made an imaginary loss of Rs.400 per share. Solution: You can buy more shares @ Rs.2000 and reduce your overall buying cost. This has to be done only if believe in the fundamentals, management and the future prospects of the company. To do this you need to keep money ready. whatever money you have and want to invest, split it into two parts. Then keep 50% cash aside, only invest with other 50%.So if need to buy more of any stock when the price falls you have ready cash. Also now if you have 200 shares of XYZ Company 100@Rs.2200 and 100@Rs.2000.Then the price goes up to Rs.2400. Sell only 100 of the shares. Then if the price further shot up, you have some shares to sell And participate in the rally to make money. Next You sold the share and the price went up. The solutoion to this is never sell all the shares at one time. Sell only 50% of your shares. So if he price goes up later you still have the other 50% to sell and make profit. The golden Rule is to first do your own analysis of the stock before investing and buy on tips. Also invest only in companies which declare dividends every year. To be sure that you are not investing in loss making companies. Every Market expert advices to do your stock analysis before investind in the stock market. But nobody tells you how. Well in my next article I will write about how to do stock anaysis using various tools such as financial ratios and by checking the track records of the comapnies you plan to invest in. P. S: If you are not Indian then replace the Rs. into your own local curreny to understand the artilce :)
: As 2005 comes to an end, investors celebrate the coming new year and bring new expectation with it. As investors, we try to sell our losing investment before the year ends and sell our winning investments after the new year. This is to receive the benefit of early tax deduction and deferring our tax liability. Either way, after selling your investment, you have some spare cash to invest. Therefore, you would need some idea on where to invest your money. Scouring the 52 week low is normally a good place to start. Tax loss selling has made many stocks to make the list. This is great for us, small investor. Barring any fundamental news, cheap stocks that get cheaper will be a good investment candidate. Turnaround investors look for stocks that are touching 52 week low and starts researching them. Many of them bounces, providing investors with outstanding return. Examples for this year include: ATI Technologies Inc. (ATYT, up 39% from the low), Seagate Technology (STX, up 29% from the low), Omnivision Technologies (OVTI, up 68.8% from the low) and even Maxtor Corp. (MXO, up 45% from the low before being acquired). Maxtor is now trading 120% above its 52 week low. While stocks touching new 52 week low, do not always bounce, this is a good place to start your research. Therefore, your prey for 2006 should at least include companies that has recently touched 52 week low. These are several ideas to get you started for 2006. Pier One Imports Inc. (PIR). The retail stores specializing on furniture and other decorative accessories, are experiencing customer defection this year. Same store sales has been declining and there is little indication that it will change. Warren Buffett used to own a piece of this company. He has since cut back on his stake late this year. It has recently fallen to $ 8.90 per share from the 52 week high of $ 19.98, a 55 % hair cut. Shanda Interactive Entertainment (SNDA). For overseas exposure, especially China, Shanda should be on your watch list.
It provides online gaming to the Chinese community, especially Massively Multiplayer Online Role Playing Games (MMORPG). Don't let the word scare you. It is basically an online gaming portal where it lets gamers fight/play with other gamers. A good way to foster customer's loyalty is through the interaction with other individuals. Online Gaming provides Shanda with that opportunity.
It has fallen to $ 15.00 from its 52 week high of $ 45.40, a 67% hair cut. The appealing thing about Shanda is its strong balance sheet (more cash than long-term debt) and the potential growth of its market. Furthermore, the company is profitable. Those cash pile will continue to grow if that happens. Navistar International Corp. (NAV). This company makes and distributes commercial trucks and bussespetitors include Paccar, Volvo and the like. It is sporting a forward P/E of 6 and decent balance sheet.
If it can maintain a 0% growth in profits, the stock price won't trade at $ 28.80 for very long. Verizon Communications Inc. (VZ). The largest baby bells of all are having a decent year on the profit line. However, concerns about competitions and high debt load, has reduced its stock price for year 2005. It is currently trading at $ 30.27 per share with dividend yield of 5.30%. Currently, dividend is about half of its annual profit, which is considered safe. If Verizon can repeat its profit performance, the dividend for 2006 will be safe.
However, it currently has a high debt load of $ 34.3 Billion. The company has tried to reduce its debt using its cash flow from operations. On Dec 31st 2002, long term debt stood at $ 44.8 Billion. Therefore, balance sheet has actually improved while stock price goes nowhere.
Fresh Del Monte Produce Inc. (FDP). The makers and distributors of fresh fruit produce is not having a good year. Pricing weakness, combined with the higher than expected cost, has decimated its stock price. Recently, management has reportedly hire JP Morgan to run an auction for the company.
It can be sold to as high as $ 1.8 Billion according to TheDeal. This translates into $ 30.70 per share. FDP recently trade at $ 23.64 per share.
If the deal goes through next year, you have the potential of a 29.9% return. However, the fact that management is exploring the buyout, indicates that business aren't so good at this company. If the deal doesn't go through, stock price may see further depreciation.
Why is it that some people are successful in trading the markets? And why is it some people fail? Is it luck that determines if you are successful or not in making money from the market? Is it the system or strategy that a person use which determines their success? A lot would say that it is the system or strategy that they employ which ultimately determines if they come out winning from the market. Every system that exists on the internet will show you how to make money using it. Without a doubt, it will make money for you. The question is usually how much money will the system make for you. All the system that out there will show to you how their system has work base on historical data or activity and then at the bottom of the page there would be a disclaimer clause that states ‘.. Historical data does not determine or guarantee future earnings....’ So why is it that these sites or page include this disclaimer clause? The disclaimer clause is incorporated in it because they know that there are certain elements which they can not control. Human emotions. Human emotions are always the key to either success or failure in any business. And it is no difference when trading the markets. Read all the books about trading that you want, buy all the successful system that you want. If you can’t control your emotions, you can’t succeed in the markets. That’s the reason for the disclaimers clause because the one thing that the author can not control is their subscribers or customers emotions. In the market there are but only two main emotions that every trader will experience; GREED and FEAR. When this emotion appears it is not how we eliminate it but rather how we act on it. There are natural emotions that can not be eliminated. This emotions forces us to action, thus how we act on it will determine the outcome. Like anger, when we are angry at someone, it’s either we say something nasty or we can just kick a bucket or we can just dive into a pool of water. Which ever action that we take, it produces a different outcome or result. All too often when we begin to see two to three consecutive loses on our trading activities, we would begin to have doubt. When this happens we are already at the state of fear, we fear losing more of our money and thus begin to doubt that the system is working. While no system is absolute, meaning no system will guarantee that you will make money ALL the time. The system seller would say that we would be able to make money consistently, provided we follow their system to the dot. On the other hand, when we begin to see two or three consecutive we begin to feel on top of the world. We begin to feel that we can start making good money from the market and then start tweaking the system or maybe putting more money in the market to leverage our earnings or maybe begin to take on more positions, which ultimately make us deviate from the system which we were using. This is when greed has already stepped in to rule our thoughts. There is saying ‘The system is only as good as the person using it’. So if we don’t follow the system either with we are making loses or when we are creating profits. We would ultimately fail. And to follow the system requires discipline. The discipline to act on our fear and greed when it sets in, will determine how well we do in the market. Once again discipline is the key. We must have the discipline to say ‘I have reached my target. I should take profits now even though it may go higher’ when greed sets in. And when fear sets in one should say ‘I have to take a position even though the market does not seem to be moving in my favor’ While these are but two circumstances when greed and fears arises, there are, and will be many instances when we need to make a decision to either enter or exit the market. And these are very two most important decisions to take in order to succeed in the markets. The discipline to follow the system diligently no matter what happens to the market So no matter how good the system is, the only and sure way is to lasting success in the market depend on the discipline to overcome our personal emotional to follow a particular system religiously.
Stock picking is a very complicated process and investors have different approaches. However, it is wise to follow general steps to minimize the risk of the investments. This article will outline these basic steps for picking high performance stocks. Step 1. Decide on the time frame and the general strategy of the investment. This step is very important because it will dictate the type of stocks you buy. Suppose you decide to be a long term investor, you would want to find stocks that have sustainable competitive advantages along with stable growth. The key for finding these stocks is by looking at the historical performance of each stock over the past decades and do a simple business S. W.O. T. (Strength-weakness-opportunity-threat) analysis on the company. If you decide to be a short term investor, you would like to adhere to one of the following strategies: a. Momentum Trading. This strategy is to look for stocks that increase in both price and volume over the recent past. Most technical analyses support this trading strategy. My advice on this strategy is to look for stocks that have demonstrated stable and smooth rises in their prices. The idea is that when the stocks are not volatile, you can simply ride the up-trend until the trend breaks. b. Contrarian Strategy. This strategy is to look for over-reactions in the stock market. Researches show that stock market is not always efficient, which means prices do not always accurately represent the values of the stocks. When a company announces a bad news, people panic and price often drops below the stock's fair value. To decide whether a stock over-reacted to a news, you should look at the possibility of recovery from the impact of the bad news. For example, if the stock drops 20% after the company loses a legal case that has no permanent damage to the business's brand and product, you can be confident that the market over-reacted. My advice on this strategy is to find a list of stocks that have recent drops in prices, analyze the potential for a reversal (through candlestick analysis). If the stocks demonstrate candlestick reversal patterns, I will go through the recent news to analyze the causes of the recent price drops to determine the existence of over-sold opportunities. Step 2. Conduct researches that give you a selection of stocks that is consistent to your investment time frame and strategy. There are numerous stock screeners on the web that can help you find stocks according to your needs. Step 3. Once you have a list of stocks to buy, you would need to diversify them in a way that gives the greatest reward/risk ratio. One way to do this is conduct a Markowitz analysis for your portfolio. The analysis will give you the proportions of money you should allocate to each stock. This step is crucial because diversification is one of the free-lunches in the investment world. These three steps should get you started in your quest to consistently make money in the stock market. They will deepen your knowledge about the financial markets, and would provide a sense of confidence that helps you to make better trading decisions.
Once you determine which business cycle the economy is currently in you can start researching for a trade. It is best to have some sort of a system in place that will be used before EACH trade. Here is a simple 5 Step formula to help get you started. 5 Steps to Investing Online: 1. Find a stock This is the most obvious and most difficult step in stock trading. With well over 10,000 stocks to trade a good rule of thumb to consider is time of the year. For example, as I write this, it is the beginning of spring. It would make sense to consider stocks that traditionally make runs, or slide if you are bearish, during this time of year. 2. Fundamental Analysis Many short term traders may disagree with the need to do ANY Fundamental Analysis, however knowing the chart patterns from the past and the news regarding the stock is relevant. An example would be earnings season. If you are planning on playing a stock to the upside that has missed its earnings target the last 3 quarters, caution could be in order. 3. Technical Analysis This is the part where indicators come in. Stochastics, the MACD, volume, moving averages, RSI, CCI, support levels, resistance levels and all the rest. The batch of indicators you choose, whether lagging or leading, may depend on where you get your education. Keep it simple when first starting out, using too many indicators in the beginning is a ticket to the land of big losses. Get very comfortable using one or two indicators first. Learn their intricacies and you'll be sure to make better trades. 4. Follow your picks Once you have placed a few stock trades you should be managing them properly. If the trade is meant to be a short term trade watch it closely for your exit signal. If it's a swing trade, watch for the indicators that tell you the trend is shifting. If it's a long term trade remember to set weekly or monthly checkups on the stock. Use this time to keep abreast of the news, determine your price targets, set stop losses, and keep an eye on other stocks that you may want to own as well. 5. The big picture As the saying goes, all ships rise and fall with the tide. Knowing which sectors are heating up stacks the chips in your favor. For example, if you are long (expecting price to go up) on an oil stock and most of the oil sector is rising then more likely than not you are on the right side of the trade. Several trading platforms will give you access to sector-wide information so that you can get the education you need.
Investing in penny stocks provides traders with the opportunity to dramatically increase their profits, however, it also provides an equal opportunity to lose your trading capital quickly. These 5 tips will help you lower the risk of one of the riskiest investment vehicles. 1. Penny Stocks are a penny for a reason. While we all dream about investing in the next Microsoft or the next Home Depot, the truth is, the odds of you finding that once in a decade success story are slim. These companies are either starting out and purchased a shell company because it was cheaper than an IPO, or they simply do not have a business plan compelling enough to justify investment banker's money for an IPO. This doesn't make them a bad investment, but it should make you be realistic about the kind of company that you are investing in. 2. Trading Volumes Look for a consistent high volume of shares being traded. Looking at the average volume can be misleading. If ABC trades 1 million shares today, and doesn't trade for the rest of the week, the daily average will appear to be 200 000 shares. In order to get in and out at an acceptable rate of return, you need consistent volume. Also look at the number of trades per day. Is it 1 insider selling or buying? Liquidity should be the first thing to look at. If there is no volume, you will end up holding "dead money", where the only way of selling shares is to dump at the bid, which will put more selling pressure, resulting in an even lower sell price. 3. Does the company know how to make a profit? While its not unusual to see a start up company run at a loss, its important to look at why they are losing money. Is it manageable? Will they have to seek further financing (resulting in dilution of your shares) or will they have to seek a joint partnership that favors the other company? If your company knows how to make a profit, the company can use that money to grow their business, which increases shareholder value. You have to do some research to find these companies, but when you do, you lower the risk of a loss of your capital, and increase the odds of a much higher return. 4. Have an entry and exit plan - and stick to it. Penny stocks are volitile. They will quickly move up, and move down just as quickly. Remember, if you buy a stock at $0.10 and sell it at $0.12, that represents a 20% return on your investment. A 2 cent decline leaves you with a 20% loss. Many stocks trade in this range on a daily basis. If your investment capital is $10 000, a 20% loss is a $2000 loss. Do this 5 times and you're out of money. Keep your stops close. If you get stopped out, move on to the next opportunity. The market is telling you something, and whether you want to admit it or not, its usually best to listen. If your plan was to sell at $0.12 and it jumps to $0.13, either take the 30% gain, or better still, place your stop at $0.12. Lock in your profits while not capping the upside potential. 5. How did you find out about the stock? Most people find out about penny stocks through a mailing list. There are many excellent penny stock newsletters, however, there are just as many who are pumping and dumping. They, along with insiders, will load up on shares, then begin to pump the company to unsuspecting newsletter subscribers. These subscribers buy while insiders are selling. Guess who wins here. Not all newsletters are bad. Having worked in the industry for the last 8 years, I have seen my share of unscrupulous companies and promoters. Some are paid in shares, sometimes in restricted shares (an agreement whereby the shares cannot be sold for a predetermined period of time), others in cash. How to spot the good companies from the bad? Simply subscribe, and track the investments. Was there a legitimate opportunity to make money? Do they have a track record of providing subscribers with great opportunities? You'll start to notice quickly if you have subscribed to a good newsletter or not. One other tip I would offer to you is not to invest more than 20% of your overall portfolio in penny stocks. You are investing to make money and preserve capital to fight another battle. If you put too much of your capital at risk, you increase the odds of losing your capital. If that 20% grows, you'll have more than enough money to make a healthy rate of return. Penny stocks are risky to begin with, why put your money more at risk?
Investors who bought during the top of the frothy commodities rally are now panicking or kicking themselves. Neither activity helps an investor or trader think straight. Below are a few tips in dealing with the current market shakeout. 1. If you believe you invested in the right stock(s), then turn off your computer and do something enjoyable. Exercise is a great stress reliever. The market has already begun its shakeout. If you didn’t get stopped out, or failed to place earlier stops, your best opportunity lays ahead in picking up additional shares at a much lower price. Most of the experts we’ve interviewed tell us the next rally should start sometime between late July and Labor Day. In an attempt to interview the uranium guru James Dines in late May, we were told, “Call back in a couple of months.” That was a helpful clue that the markets were less than exciting. Mr. Dines is often eager to be interviewed, but recently he was not. 2. Do you believe the fundamentals which engendered the commodities boom have changed? If they haven’t, then the bullishness is only taking a breather. We don’t see any fundamental change in the markets. Russia still wants nuclear power, and its oil production may be peaking. China hasn’t announced the end of its nuclear expansion program. India wants to spend $40 billion on new nuclear reactors. If you are invested in uranium stocks, spot uranium jumped another dollar to $45/pound this past week. Hardly the end of the bull market. 3. If you worry about your investment in one stock or another, then stop watching the ticker and focus on the company fundamentals. Is the story still true or has it changed? See #7 A, B and C below. 4. There’s an old clichй that the time to buy is when you feel like dumping everything you own in the category. At the exact moment you want to sell your entire portfolio of uranium stocks, it may be wiser to add to your holdings. This applies mainly to the retail investor. Most of the professionals did dump at the top and are now slowly accumulating the shares of the naпve who waited until the washout to start selling off. 5. Has a major, earth-shattering event occurred? The last bull cycle in uranium ended with Three Mile Island (TMI). The last decent rally in the precious metals markets fell off a cliff after it was discovered Bre-X Minerals had perpetrated a fraud about its gold ‘discovery’ in Indonesia. Something significant and newsworthy always transpires, and it is also far-reaching. That is the trigger. As with TMI and Bre-X, those were the first shots which launched a later chain reaction to end those bull markets. 6. Before pulling the sell trigger, ask yourself: Do I really want to give up these shares to a bargain basement hunter, who will make a killing on my losses? 7. Since most of you will still panic, please review the following basics for any of the uranium companies you’ve read about: A) How much cash does the company have in the bank? During shakeouts, cash is king. Prescient companies, which completed their financings during the recent and robust rally, are sitting pretty. They can weather the short-term storm and are well-oiled to move forward when this correction bottoms and reverses. Those companies are the strongest ones to check out when this correction looks gloomiest. B) Has the management remained the same? Unless the top financial and/or technical people blew out the door, in recent weeks, the story probably hasn’t changed muchpanies which built a strong technical team are resilient and powerful. They will move forward. C) Have the properties come up dry? One of the reasons you invested in a uranium company was because it announced it had “pounds in the ground.” Some companies have more than others. Some went to the expense and trouble of completing a National Instrument 43-101, which independently confirmed the quantity and quality of the uranium resource. If that changed – and the company announced, “Sorry, nothing there after all,” or announced, “Hey, we were kidding,” that’s one thing. If you haven’t heard that, or read a news release announcing that, then the uranium didn’t walk away or move onto a competitor’s property. It’s still there. Next time, when the markets are racing higher, and you feel like you won the lottery, consider this bit of biblical advice. The old joke goes, “When did Noah build his ark?” The answer of course is: Before it began to rain.
Your stock trading rules are your money. When you follow your rules you make money. However if you break your own stock trading rules the most likely outcome is that you will lose money. Once you have a reliable set of stock trading rules it is important to keep them in mind. Here is one discipline that can reap rewards. Read these rules before your day starts and also read the rules when your day ends. Rule 1: I must follow my rules. Naturally if you develop a set of rules they are to be followed. It is human nature to want to vary or break rules and it takes discipline to continue to act in accordance with the established rules. Rule 2: I will never risk more than 3% of my total portfolio on any one stock trade. There are many old traders. There are many bold traders. But there are never any old bold traders. Protecting your capital base is fundamental to successful stock market trading over time. Rule 3: I will cut my losses at 5% to 15% when I am wrong without question. Some traders have an even lower tolerance for loss. The key point here is to have set points (stop loss) within the limits of your tolerance for loss. Stay informed about the performance of you stock and stick to your stop loss point. Rule 4: Never set price targets. This is a style that will allow me to get the most out of rising stocks. Simply let the profits run. Realistically, I can never pick tops. Never feel a stock has risen too high too quickly. Be willing to give back a good percentage of profits in the hope of much bigger profits. The big money is made from trading the really BIG moves that I can occasionally catch. Rule 5: Master one style. Keep learning and getting better at this one method of trading. Never jump from one trading style to another. Master one style rather than become average at implementing several styles. Rule 6: Let price and volume be my guides. Never listen to any opinion about the stock market or individual stocks you are considering trading or are already trading. Everything is reflected in the price and volume. Rule 7: Take all valid signals that show up. Don't make excuses. If an entry signal shows up you have no excuse not to take it. Rule 8: Never trade from intra-day data. There is always stock price variation within the course of any trading day. Relying on this data for momentum trading can lead to some wrong decisions. Rule 9: Take time out. Successful stock trading isn't solely about trading. It's also about emotional strength and physical fitness. Reduce the stress every day by taking time off the computer and working on other areas. A stressful trader will not make it in the long term. Rule 10: Be an above average trader. In order to succeed in the stock market you don't need to do anything exceptional. You simply need to not do what the average trader does. The average trader is inconsistent and undisciplined. Ask yourself every day, "Did I follow my method today?" If your answer is no then you are in trouble and it's time to recommit yourself to your stock trading rules.