Words of Experience

Starting your own business can be a risky, time consuming and often costly labor of love. There are many traps that budding entrepreneurs can fall into. So knowing about what to look out for, and what to avoid can be the difference between your business flourishing and collapsing.

For Gareth Williams, co-founder and Chief Executive of Skyscanner, the vacation price comparison website, placing emphasis on who you hire – especially when your business is in its infancy – is of paramount importance.

“Make hiring your top priority and not a side job,” he told CNBC.com. “Normally, you’re so busy that you try to fit interviewing and hiring around the edges of your job, but actually the success of what you do will be guided by your success in hiring.”

(Read more: Has the UK become the ‘number 1’ place to start a business?)

Choosing the right medium for your message to potential clients and investors is another issue.

“Avoid communicating important or complicated messages by email,” Williams added.

“When you’re an entrepreneur, a lot seems obvious: you’re thinking about your concept and its context all the time. If you try to take a short cut and explain something by email then you’re probably going to find that only 10 per cent of the message is understood. You’ve got to do it in person, got to spend time explaining your message and taking feedback.”

Clarity of vision and facing facts is also key, according to William Chase, a potato farmer and entrepreneur who founded the luxury crisp company Tyrells, and now runs the Chase Distillery in Herefordshire, England, which produces one of the world’s best vodkas.

“People don’t react to things that aren’t working,” he told CNBC.com. “If you’re trying to sell something to people and they don’t want it, you have to act. You mustn’t keep going, you’ve got to stop, find out what it is they do want, and then turn around and sell it.”

(Read more: The entrepreneur’s biggest risk may be retirement)

Reining in your ambitions – at least initially – can also be beneficial. “Rather than start something that’s too big, start small so you have time to move the business in the direction you want it to go,” Chase added.

Starting small should not, however, limit your business. “If you set modest goals for the company, it’s unlikely that you will exceed them,” Williams, of Skyscanner, said. “Absolutely start small, but if you’re not aware of the larger opportunity, then you will never exploit it.”

Rekha Mehr started Pistachio Rose, a boutique bakery specializing in luxury Anglo-Indian cakes and biscuits, last year. This March, she was chosen to be an ‘entrepreneur in residence’ at the Department for Business, Innovation and Skills, where she is aiding the UK government in its efforts to connect with small to medium-sized enterprises.

“Not finding a mentor early enough into the journey,” is a key error that many fledgling businesses make, she told CNBC.com. “This was certainly the case with me. I didn’t appreciate the difference that having a lack of structure and nobody to bounce ideas off of would have on me.”

(Read more: Small business confidence at 3-year high)

Realizing the toll starting a business will have on your emotions is also vital, Mehr added. “I didn’t appreciate that, actually, it’s incredibly emotional,” she said. “The downs are the biggest I’ve ever had in my life. Working alone, in an unstructured environment and not having a mentor in place, you have self-doubt.”

Eighteen months into running her own profitable business, what else would Mehr advise others avoid? “Applying for finance too early, or believing that everyone needs a loan to start a business. There is something to be said for going back to the old school principle of starting small, generating cash and just building up organically,” she added. “Anybody who thinks that they can’t do it because they don’t have money, that’s not accurate. You can get by on very little.”

Perhaps though, the best piece of advice – simple, to the point and obvious – comes from Chase. “If you’re in a hole, stop digging.”

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Flat base pattern

Flat base is a powerful chat pattern that has a box-like appearance. It usually forms after a breakout from cup and handle pattern or a double bottom pattern. 

In a flat base, the consolidation lets the stock digest prior gains. Stocks can also form flat bases when the overall market is in a downtrend or can’t muster much progress.

A flat base is one of the shorter price patterns. It only needs a minimum of five weeks to take shape. Most other price structures need at least seven weeks.

– Correction in the base should be no more than 15% from the stock’s peak
– Volume on breakout day should be 40% more than average
– Entry price is 10c more than the high of the pattern

CAN SLIM

C: current earnings 
Earnings growth of at least 25% in recent quarters

A: annual earnings
Earning growth of at least 25% in last 3 years

N: new
New product, services, management, price highs

S: supply and demand

L: leader

I: institutional sponsorships
Big money accounts for 75% of market activity.

M: market direction
3/4 stocks follow the general market trends

Conventional and new wisdom

Conventional wisdom: Buy low, sell high

New wisdom: Buy high, sell higher

– At or near 52 week high
– Leading stocks in leading group
– During a confirmed uptrend
– Be careful when buying stocks $15 or lower. You want to buy right, not buy cheap.

Conventional wisdom: Buy on dips

New wisdom: Buy on the way up

Conventional wisdom: Buy and hold

New wisdom: Hold a leader for the run, then sell.

– A leader’s average run lasts for 12-18 months.

老人院的一天

用钱赚钱是挺聪明,不过用思想赚钱才是另一个境界。

我宁愿给他分多一点期权,我也不要承担所有的风险。

期权让你分到利润的一部分,股份让你分利,但也分险。

During a Correction

During a market correction, buying new stocks entails high risk. But investors who had bought the true leaders at early breakouts and enjoy a thick cushion of gains have the option to sit through a normal pullback. If a stock is quickly rebounding back above the 50-day moving average, that’s an example of constructive action. But if a stock continues to free fall after undercutting that support level, it makes sense to secure at least some profits. A great stock will recover and form a new base, giving a new chance to buy back shares.

Divergence

When the price of an asset and an indicator, index or other related asset move in opposite directions. In technical analysis, traders make transaction decisions by identifying situations of divergence, where the price of a stock and a set of relevant indicators, such as the money flow index (MFI), are moving in opposite directions.

In technical analysis, divergence is considered either positive or negative, both of which are signals of major shifts in the direction of the price. Positive divergence (convergence) occurs when the price of a security makes a new low while the indicator starts to climb upward. Negative divergence happens when the price of the security makes a new high, but the indicator fails to do the same and instead closes lower than the previous high.

The security shown is experiencing a prolonged uptrend; an observant trader would realize that the price ROC is sloping down while the price continues to climb. This type of negative divergence can be an early sign that the price of the underlying security may be reversing. If the price of the security breaks below the upward trendline, this will complete the confirmation and the trader will take a short position.

 

PEG

Likewise, active traders need to understand that research
shows the PEG ratio has more predictive power than any other
indicator.

In case you’re unfamiliar with it, the PEG is a stock’s P/E
(price/earnings) ratio divided by the earnings per share
growth rate.

So, if for example, a stock has a P/E of 12 and EPS is
growing at 12% a year, it’s PEG would be 12/12, or 1.

The easy way to spot undervalued stocks is to see the
stock’s PEG.

As a general rule, a PEG of less than 1 means a stock is
undervalued. A PEG greater than 1 means a stock may be
overvalued.

In essence, the PEG tells you how much you’re paying for a
given amount of expected earnings growth.

3 Types of Investing

Of course, it begs the question:

“What did Dan Zanger do to make so much money so quickly trading stocks?”

Especially since he was just an ordinary everyday guy with no formal training or experience.

Well, to answer that question, you need to understand this…

As far as we know, only three investing strategies account for all stock market returns.

The first of these is… Value Investing.

Coca-ColaThe most famous value investor is, of course, Warren Buffet. Value investing is a simple and proven way to make money in stocks.

You find companies undervalued when compared to their actual ability to turn a profit. You buy shares in those companies. You wait to see the share prices rise as the companies grow and turn higher profits.

Let’s pretend you were born in 1919. Your grandparents – Ma and Pa Jenkins – bought one share of Coca Cola stock for you at $40. The split adjusted value of that single share… with dividends reinvested… would be worth somewhere in the neighborhood of $8.7-million by 2011. Nice neighborhood!

Oh… and your one share would have grown to 129,000 shares. And you’d also be getting about $242,000 in annual dividend payments.

The downside of value investing is you have to wait it out. Sometimes decades. While riding the inevitable ups and downs of the market.

If the companies you invest in last, you could end up with a hefty portfolio.

Of course, you might be too old to do anything with the money… but… that’s another issue altogether.

The second is… Small Cap Investing.

Another simple and tested concept. You buy smaller companies with high growth potential. As they become bigger companies their share prices go up too.

You don’t have to wait as long with small caps to see a profit. But if you don’t pick the right ones you’ll lose money faster as well.

Pimples-B-gonePretend a fictional company named Pimples-B-Gone, Inc. comes out with a real cure for… um… pimples. The company is tiny with a market cap of $400-million. Any company under a $2-billion cap is generally considered small.

Because of its size, Pimples-B-Gone, Inc. is not on the radar of any of the big institutional traders. So it goes unnoticed by just about everyone.

Share prices sell for $7 or so.

You get in on the bottom and buy a boatload of cheap shares.

Word spreads about the product. Since it works, pimple-faced teens buy it in droves. Investors take notice. They begin pouring hundreds of millions into Pimples-B-Gone, Inc. The result is share prices skyrocket to $21 in a year.

You sell and make 300% on your investment. Or you could sell sooner and make less. Or you could wait and hold on while share prices continue spiking.

The point is you get faster and often bigger returns. That’s the basic idea anyway. In fact, you could use this strategy as an income-generator in the short term.

Value Investing and Small Cap Investing have been around for decades. They account for 90% of stock market returns. The other 10% was a mystery until the mid-1990’s. It’s based on a variation of what Dan Zanger did to become a multi-millionaire trader.

Money Pile

Professors Eugene Fama and Kenneth French began a detailed analysis of stock market data in the 1980’s.

They developed a model which explained how value and small cap investing beat the overall stock market. Yet they were unable to figure out the last piece of the puzzle.

That is until one of Fama’s understudies – Mark Carhart – used the university’s stocks database to do a little testing of his own.

Almost by accident, Carhart stumbled upon the concept of…

… Momentum Investing.

Which explains the final 10% of stock market returns. After decades of being in the dark, we now know the only three ways to make money in the stock market.

What’s more, with momentum investing you can profit from short, medium and long term time frames. You can trade momentum daily, weekly, monthly or whatever.

Momentum trading describes the buying and selling force behind a price move.

A “body” in motion tends to stay in motion. So do stock prices. A stock surging up tends to keep surging. A stock dropping down tends to keep dropping.

The two components of momentum trading are: (1) a rapid price move… and… (2) high volume support. Once a price starts moving… and… a bunch of investors plow money into the stock… the price keeps on moving in the same general direction.

For the most part, that is the strategy Dan Zanger used. In an interview with FORTUNE, Zanger said, “I trade whatever the market is going to push up the most.”

He relies on the same process today.

Now there are a variety of ways (a.k.a. “systems”) for trading momentum. Zanger’s is one 99% of regular traders couldn’t follow in a million years.

I’ll tell you why in just a bit.

Before I spill the beans, I think it’s important you understand why my style of momentum trading is a high-profit, low-risk strategy:

  • #1: You’re finding the small cap stocks overlooked by most traders. These stocks “run-up” higher and faster than any others. After all, it’s much easier for a $3 stock to go to $6… than… for a $100 stock to jump to $200. You’ll have little competition. Institutional investors won’t pay attention to them. Main Street investors won’t know about them.
  • #2: You choose the small cap stocks which are going up MORE THAN other stocks. In other words, not just any stocks will do. Only stocks with the biggest, most recent gains make for the best momentum trades. Keep this in mind…

    “Stocks outperforming the market tend to keep outperforming the market in the future.”

And finally…

  • #3: You “bet” on the most likely winners by going with an established trend and not against it.