The article "Trading Baskets Part I" talks about investing, it has been released by Floyd Snyder.
Q. What is a basket?A basket is a group of up to 50 stocks that you can trade, manage and track as one entity.In another article, I worte about a rather conservative method of being in the stock market. See: "A Triple Dipper: How to Make 3 Profits on 1 Stock" at http://www.Traderaide.Com/Selected_Articles/Tripple_Dipper.Html.This time let’s talk a little about trading "baskets".
The definition above mabye needs to be expanded just a bit. You can trade baskets using longer term buy and hold strategies, a shorter-term swnig trading approach or as a day trader.
A basket of stocks is nothing more then any group of stocks that somebody has grouped together for any of a number of reaosns.
They may be of the same sector, or they may be made up of a number of stocks in different sectors.An example of a couple of baskets could look like what is sited below. To save time and space I’ll use the stock symbols only. You can look them up after if you're interesetd. Let’s say you see stem cell research as the thing of the futrue and wanted to be invested in it. If you don’t know which stcok is going to fair the best, you may want buy a basket of stocks this is made up of ASTM GERN and STEM. This wolud be a basket of stem cell stocks. Now let’s say you guess the Internet stcoks look good and, again, you're not sure which ones will do the hottest. In your Internet basket you may want to pick up shaers of EBAY, YHOO and AMZN. Obviously your basket can contain any numebr of stocks you want.
Many online brokers will actually allow you to set up baskets in your account, and you can put in a sell order all at once on the entire basket or pick and chose which ones you want to sell.
I’m not recommending these stocks in any way, shape or form, but merely using them as examples.Okay, that’s pretty basic, but I’m sure you get the picture.
The examples above would more or less be the type of baskets you would probably be thinking of holding for time and not day trading.Most day traders have an entirely different kind of basket of stocks.
A day trader may have any number of stocks in his trading basket that he or she has been become really familiar with. They have studied them and even charted them for intraday movement (I hope) for time and have laerned the trading habits of the individual stocks. They have a fairly good idea of how the stock moves on a daily basis with or withuot news. They have knowledge of how it reacts to earnings, anaylst upgrades, analyst downgrades and other events that may be reoccurring.
They have also probably learned how they trade when hit by surprise events as well. They know whcih market makers to watch the closest.
They also know who the main market maker in the stock is, often referred to as the axe.A day trader’s basket may be any number of sotcks.
A good avergae could be somewhere between 25-50 stocks.
But it may also be larger or samller. I have known traders that traded one stock all day long and nothing else. I have known others that were able to watch 300 stocks. Personally, I guess this is way too many.When I was trading I had a basket of about 75 stocks. Some I knew were only going to be in play on news or when reporting eanrings.
Others were fairly reliable moves on a daily bsais.
And still others were extremely sensitive to any sort of news or event.Today, if I was going to put together a basket of stocks, I would be looking at the following symbols: GOOG, TASR, TZOO, AIRT, QLGC, SYMC, PLMO, KMRT, EBAY, SINA, RIMM, RMBS, PCLN, and DCLK as well as other NASDAQ stokcs. I would not over look New York Stcok Exchange stocks, although many do. I would be looking at: MO, PFE, CAT, GE, GM, TYC, MRK, MOT, and otehrs as well. Keep in mind, I am not recommending any of these stocks specifically for you to buy or trade.
I am merely trying to give you an example of what a basket may look like.
You have to decide yourself what stocks you would add to you your basket based on your own knowledge ganied through experience and research on each stock.I guess every trader should have a basket of stocks he or she follows and trades.
Day trading witohut your own basket raises the risk level and puts you in a position where you're always looking for something to trade. On slow days where the market is just not offering up much in the way of trading opportunities, you may have a tendency to jump on stocks, that under different circumstances, you wuold have passed on.
Having your own basket of stocks will lower your exposure to risk. They may not move any better under slow market conditions, but at least you will have knowledge of how they move.
In Part II I will tell you about a special traidng basket technique I used during the early boom days of day trading.
It may still be a valid cocnept yesterday.No permission is needed to reproduce an unedited copy of this article as long the About The Author tag is left in tact and hot links included. We do request that we be informed of where it is posted so reciprocal links can be considered. Eamil floyd@sbmag.Org.Floyd Snyder has been trading and investing in the stock market for three decades. He was on the forefront of the day trading craze that swept the nation back in the late1990's both as a trader and as the moderator of one of the Internet's largest real time trading rooms. He is the owner of http://www.TraderAide.Com , Strictly Business Maagzine at http://www.Sbmag.Org http://www.FrameHouseGallery.Com and http://www.EducationResourcesNetwork.Com
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