One of my favorite contributors to Real Money is Alan Farley.
What makes his work worthwhile to me is this ability to read the overall environment and derive specific, easy rules to help adapt and survive the turmoil, whatever it might be at the moment.
This week, he offers some common sense advice to traders who may be hacking themselves up in the whip-saw, choppy markets of late:
• Pick lower-volatility stocks.
Why pick lower-volatility stocks? Slower movers let you to react in slow motion and not get hurt by intraday swings. You won’t make money as fast with these trading tortoises, but you won’t lose it as fast, either.
• Trade smaller size
By reducing position size, you let a stock travel over a greater distance without damaging your equity. Present conditions aren’t a good time to place big bets on market direction. Remember, size equals risk.
• Use limit orders
Avoid market orders entirely. Place a limit order at your carefully chosen price, regardless of where the stock is trading at the time. If you don’t get filled, just move on to the next opportunity.
• Place physical stops
Place a physical stop as soon as the position gets filled, to protect you from major losses and preserve profits when the market moves in your favor.
• Lower your commissions
You need a resourceful broker who provides low-cost execution, fast reporting and many ways to access information.
• Hold positions longer
Don’t act like a daytrader unless you are one. Most of us should avoid the intraday markets because the volatility forces bad decisions. Instead, save your analysis for an end-of-day review.
That’s all good, straightforward advice for traders and investors alike.
Adjust Your Second-Quarter Strategy
RealMoney.com, 3/30/2006 12:38 PM EST
Back in December 2004, I wrote a column titled "Five Under-the-Radar Trends for 2005". One of the below radar trends I predicted was the acceleration of intellectual property lawsuits. That turned out to be rather prescient.
There are actually two different issues here: The first is, should the USPO
be issuing so many patents, especially those for business methods? Amazon’s One-click buying, and MercExchange’s Buy it now auction are certainly questionable "inventions." That’s an issue for Congress, who needs to adequately fund the Patent Office so they can hire many more patent examiners, rather than merely have an under staffed patent office rubber stamp applications.
The second issue is that once a patent becomes issued, who gets to use it and how? Very often, we see the first issue inappropriately raised as a PR defense in the second. I don’t get the sense that all of the financial media really has a firm grasp on this. There is an entire world of patents, innovation, USPO issues, and large corporate litigants that have not been adequately discussed. Some get it, some don’t. Compare this story: "eBay Takes on the Patent Trolls" with this one "In Patent Case, EBay Tries To Fight Its Way Out of Paper Bag." (For some intercorporate litigation, see Apple against Apple Corps. Ltd., and TiVo’s against EchoStar’s Dish Network).
Incidentally, the term "Patent Troll" was invented by Peter Detkin when he was defending a patent case against Intel. Ironically, Detkin is now managing director with Intellectual Ventures, an intellectual property firm suing patent infringers.
If you recognize the property right inherent in patents, then the term "Patent Troll" is quite meaningless, meant to stir up political opposition to patents. How you use your property is irrelevant to the property right attached to it. What does it matter if you choose to manufacture widgets — or merely license the patent to thos ethat do?
What is actually going on now is a massive land grab underway by large corporations, looking to keep the fruits of entrepreneurs and innovators labor for themselves. These are not meek and vulnerable entities at the mercy of lawyers; rather, these are very astute players seeking to use the patent to further their own goals — often at the expense of innovation.
Take Intel, where Detkin was vice president and assistant general counsel, for example. They are certainly no stranger to patent litigation. As the book Inside Intel makes clear, INTC used its patents as a club to thwart competition in the CPU market for decades. That’s why its taken AMD so long to become a legitimate competitor to the chip giant.
The stealing of entrepreneurial innovation by large firms is fairly common place. My own experience with patent enforcement is that it is an enormously expensive, difficult, time consuming venture, fraught with peril. Consider the case of Robert Kearns, the inventor of the intermittant windshield wiper. In 1967, he received several patents on his design, which he tried to license to the Big 3 in Detroit. They sent him
packing, but later the intermittant windshield wiper somehow found its
way into autos. Long story short, he ended up in litigation for decades before finally winning. Thats decades later.