Sunday, April 7, 2013

Due Diligence: The Importance of Risk Management

When it comes making an investment, managing your risk can affected your trade in ways you never thought possible. And in this business of trading stocks, risk management is one of, if not THE, most important aspect of the business. Because at the end of the day, all we are doing as traders, is determining how much money we are willing to risk, to try and turn a profit.

The first, and most important, thing you need to figure out when you are managing your risk, is how much money you are willing to risk losing on a single trade. This % will most likely be different for each trader since some can afford to lose more than others, but for the most part people usually will risk 2% on the conservative side, up to 5% if they are feeling a little more aggressive and can afford the loss.

At first it may seem like there can't be that big of a difference in risking 2%, compared to 5%, compared to even 10%, but over the long run, it can make a WORLD of difference. 

Just take a look at this chart below . This is showing the difference between what % of your account you will need to make back after only 4 losing trades in a row to just break even. 

After only 4 losing trades, risking 10%, you would need to make over an astonishing 50% of your equity just to BREAK EVEN! Where as if you properly manage your risk, and only risk 2% of your equity each trade, you will only need to make 8.42% of your equity to break even.

There is a TREMENDOUS difference between having to only make 8% of your equity, compared to 50% of your equity. It will be drastically harder to recover from 4 losing trades in row(which is very common) if you need to make 50% of your account, than it will be if you only need to make 8%. And I don't know about you but I would much rather only have to make 8%, compared to 50%.

The second major thing managing your risk can affect is your position size. A lot of traders, I know I used to do this, just buy 1000 shares of XYZ, no matter what the price is in relation to where they set their stop loss.

For example lets say XYZ is trading in a range of 2.07 a share to 2.15 a share. And you determined that you will cut your loss if the stock dips to 2.02.

Now most people(including my old self) would likely buy 1000 shares of XYZ if it was at 2.07, 2.09, or 2.15. It doesn't matter the price, because in my head I want 1000 shares so I can make 10 dollars a point.

This is how most people trade. They will buy 1000 shares of XYZ no matter where it is in relation to their stop loss. But the trader who knows how to manage his risk, know his position size will very different depending on the price he buys the stock.

For example, Lets say our trader is willing to risk 2% of his account on this trade(so $100) and his stop loss is set at 2.02.

Lets say he can buy the stock at 2.12, and is only wanting to risk losing $100 if the stock goes to 2.02. he will buy 1000 shares.

Now lets say he can buy the stock at 2.07, and he still only wants to risk losing $100 if the stock goes to 2.02. He would then buy 2000 shares.

In both examples each trader is only risking $100 dollars if the trade goes to 2.02. But each traders position sizes are drastically different. This is because of Risk Management.
This is how knowing how to manage your risk, can greatly affect your position size.

My old self would buy 1000 shares whether I could get it at 2.12 or 2.07. But now since I know how to manage my risk, I know that I can buy 2000 shares if the stock is at 2.07, and I should only buy 1000 shares if it is at 2.12, and even if the trade goes wrong, I will still only lose 100 dollars, even though the position sizes are totally different.

I hope this shows any traders reading this how important managing your risk is. Because at the end of the day, there is a big difference in having to make 50% of your account to break even, and having to make 8% to break even. Just like there is a big difference between buying 1000 shares, and 2000 shares. And if you know how to properly manage your risk, your loss will still only be $100, whether you bought 1000 shares, or 2000 shares.

Remember Folks, always do your make sure to do your Due Diligence!

Thursday, April 4, 2013

Due Diligence Report: Chinese Housing And Land Development, Inc. (CHLN) - The Housing Rocket Ready to Launch.

If you have been watching housing sector the last six months then you must have noticed Chinese HGS Real Estate, Inc(HGSH). This chinese housing stock, which is now trading at about $10.50/share, was just $0.50/share back in November 2012. And it has been going straight up since. Take a look at the chart below.

12 Month Daily Chart

As you can see this stock has been ripping it up. And on top of that the housing market has started to turn around.

Now some of y'all may be wondering why I am bring up HGSH, and if this report is about CHLN.

Like I said before, since the housing market has been turning around, the sectors been heating up, and with HGSH pushing new highs every day, this has created the perfect environment/set up for a sympathy play.

And thats where Chinese Housing And Land Development, Inc. (CHLN) comes in.

12 Month Daily Chart

The first, and very obvious reason, why CHLN is a good sympathy play is because, just like HGSH, it is a chinese housing stock. And since the market has been loving chinese housing plays, according to HGSH's chart, it makes perfect since that their attention will soon turn to CHLN.

The second reason why CHLN is such a good candidate for a sympathy play, is what makes it truly explosive!

During last quarters earnings report HGSH reported an EPS of .12, and an EPS of .11 for the last year(2012).

That seems pretty good considering it has triggered the stock to soar from $0.50/share to $10.00+/share.

Now lets take a look at CHLN. In their 4th quarter earnings report, they had reported an EPS of .33, and an astonishing EPS of .47 for the past year!

This is why CHLN is a "Housing Rocket Ready Launch."  This company is in the same business as HGSH, which has been on an insane run the past couple months, and on top of that, their EPS for their last quarter was 3 times higher than HGSH's, and their EPS for the past year was more than 4 times higher.

With an EPS that high, there is no reason why this $2.00 stock should not rushing up to $10.00, just like HGSH, ESPECIALLY since HGSH's EPS is LESS than CHLN's!!!!!

Numbers don't lie. And the numbers are there. There is absolutely NO reason why CHLN should not be cost at least HALF, if not MORE than what HGSH is per share!

In fact there is HARD EVIDENCE on why it should actually cost MORE than HGSH per share!

Again, Numbers Don't Lie, and Neither does EPS.

Make sure to always do your Due Diligence! And be on the watch for this housing rocket to LAUNCH!!!

Price Target: $3.50-$5.00/share

Tuesday, February 5, 2013

The Nature of the Beast: Forced Buy Ins And Pumps Dumping.

Forced Buy Ins, its the Nature of the Beast. and Today that beast ran me down and clawed my eyes out. Sadly I force bought in on ECAU today during this 20% spike today for a grand total loss of 1420.00. O yeah the beast got a hold of me.

 Thankfully I didn't get bought in on SWVI during its spike as well because I was over margin and if it would have closed that high, Im not sure what would have happened, but lets just say i Could have been Belly up.  

But by the grace of God, and the Nature of the Beast.  SWVI started to dump today...FINALLY! I have been holding this short since last tuesday, and it has been a BRUTAL ride for many reasons.

The first reason SWVI has been such a brutal ride is I shorted it WAYYYYYY to early. I should have waited for the Stock to show signs of the dump like it did today. If i were to have waited to short it till today I could of had a better average than I do now even if I shorted it at the low of the day. 

P.S. This is also one of the major reasons I took such a huge loss on ECAU today. I shorted WAY to early. I should have waited for this bounce to start fading like it did today before i shorted it again. Instead I shorted it at the start of the bounce, Went way over margin, was force bought in, and took a major loss.

Lesson learned: Dont short pumps too early. You don't know how strong they are and they CAN keep going.

The second reason SWVI has been such a brutal short to hold, is I bit off WAY more than I could chew. Im Shorting with about 150% of my account value with margin. Sadly I didn't notice this till I was already in the position and it had ran against me nearly 10%.

Lesson Learned: Just cause your broker gives you buying power, doesn't mean you need to use it. 

Plan To Make It All Back(Fuck These Pumpers)

Thankfully SWVI is starting to dump and I still have all 15k shares.  Hopefully we will see this thing around .20 tomorrow and this long painful ride will have actually ended in some profits.

Check out the start of the dump.

Look at that nose dive. Looks like it will continue tomorrow

Also ECAU bounced up to 1.90 just as the market closed so I wouldn't be surprised to see it reach 2.00 tomorrow before it dumps again. Providing me with a great opportunity to re-short it :)

Started to bounce into the close.


Again today was a rough day. But at the end of the day, You trade to live, you don't live to trade.  And I am still able to trade as my main source of income so I can't complain when I have to learn these very expensive lessons. Also every trader must never forget about the Nature of the Beast. 

Friday, February 1, 2013

Due Diligence Report: Swingplane Ventures: Proof of Fraud!

Swingplane Ventures(SWVI) is an OTCBB company who's stock prices have been surging over 100% the past five days. The problem is the reason its surging. After researching this company, and watching it trade over the past few days, I have noticed many fishy things about this company that smells a lot like a fraud.

Major Reason That Prove SWVI Is a Fraud

The First sketchy thing about Swingplane, this company is being promoted by, and that alone should send the fraud flags flying.

Also APS stocks have a tendency to get pumped to the mid .30-40's range before the promoters dump the stock. Just take a look at some of their previous pumps.

APS Previous Pump and Dump Scams

FARE reached a high of about .35 before the promoters dumped it back into oblivion.

SVEN also reached a high of about .35 before dumping into oblivion.

TAGG reached a high of about .45 before it dumped into oblivion.

O wow and would you look at that! SWVI is in almost exactly the same price range as all the other APS pumps before the dumped. Also APS loves to dump on fridays so investors be CAREFUL!

Second, the company did a 35 for 1 stock split before the start of the promotion. Thats correct, they made 35 times the already ridiculous amount they would have made from the promo if they hadn't done the split. (Example: Instead of having say 1,000 shares @ .035 they could sell at the current price of .3790, they have 35,000.)

Now is it just me or is it not a little to much of a coincidence that you increase your share size 35 times, right before your stock price goes soaring 100%+? This has SCAM and FRAUD written all over it and the SEC should be all over these greedy bastards.

Third, lets look at this company before the promotion. Swingplane Ventures(SWVI)is a Nevada corporation that started as a men and women's golf clothing manufacturer in Bloomfield, Colorado. They claimed that they would be producing cutting edge golf apparel that was not only stylish, but comfortable.  Remember this, they started producing golf clothes in the Colorado.

So before APS started pumping these guys, they were a company focused on making GOLF clothes to sell in America. But since the pump has started, they are now a COPPER mining company that supposedly  will be the "biggest copper stock of 2013."

So can some one please tell me how a company that was created to make golf clothes in Colorado, decides they will start mining copper over seas in chile. What are they going to do with all the golf clothes they made? That is if they ever made anything.

These 3 Reasons Should Let Every Investor Know This is a FRAUD!!!

1. They are being promoted by

2. They did a 35 for 1 Stock split before the promo to make as much money as they can off all the suckers.

3. They started off making golf clothes in Colorado and now claim to be a copper mining company with one of the biggest copper mines in Chile.

No part of this companies story or history adds up. The only thing that does add up though is that they wanted to get as many shares as possible before they pump, and they did just that.

But besides all this, I know their are STILL some die hard investors who believe this company is real regardless of their obvious signs of fraud. So if that wasn't enough to convince you this company is a scam. Lets dive into their financials.

Balance Sheet
Here is a picture of their balance sheet taken from their latest 10-Q SEC Filing so you will know where these numbers are coming from.

Swing plane has total assets of $159,394. They also have $184,257 in liabilities. So not only does this companies story suck, their balance sheet is just as sucky since they are in debt $24,863.

How is a company with $150,000 in assets, going to be able to get copper out of a mine they say could be worth 25 billion dollars? It just doesn't add up... Like their balance sheet.

Income Statement

Lets check out their income to see how quickly they can pay off this debt.

Wow, would you look at that. They make ZERO dollars in revenue every year consistently. And on top of that, it cost them $39,907 to make make ZERO dollars.

Doesn't seem like they will be able to pay their debt off anytime soon, consider they make no money every year, yet spend $39,000 to do it. Instead of paying off their small amount of debt, they will just creep further and further into debt.

Cash Flow

Swingplane has never made a penny selling any real products. They have only been able to every make money by selling shares of common stock. MORE FLAGS OF FRAUD! When a companies only source of income is from selling stock... there is a big problem.


Swingplane Ventures is nothing more than a fraud. Its a fake company created by evil stock promoters to take the hard earned money of many naive investors. Since most of these investors will not take the time for due diligence, I will on their behalf in hopes that no man should fall victim to a classic pump and dump scam.

Above are all the signs that company is a total scam. Their financial have fraud written all over them.
There story has fraud written all over it. And the fact that they did a 35 to 1 stock split before the promo shows you how greedy these degenerates really are.  I hope every investor gets the facts so they can make the proper decision. But as a rule of thumb, DONT BUY SCAMS! and always look for the Due Diligence Report!