Update on CPO

Corn Products International (CPO) which entered the FP80 portfolio on June 11th got a boost this morning from Zacks. Today Zacks profiled CPO in their morning newsletter as a strong buy citing the good earnings reports and projected EPS growth.

While this is good news for CPO and certainly highlights that CPO has a good long term investment potential we are mostly swing traders here which means we capitalize on short term quick profit moves in price. The average swing trade holding is anywhere from a few days to a few months.

The concept is to keep taking quick gains and roll them over into the next holding. Our goal is to achieve much higher gains on an annualized basis over what you would achieve by just "buy and hold" strategy.

Is is important to remember that with any type of investments (swing trade, position trade, buy and hold, etc.) that proper money management is critical to success. You always protect your capital! With swing and position trading you divide your capital into 10 pieces (if your new to swing trading then don't try to get too aggressive and divide up your capital any more than the 10 pieces.. over time you can adjust this but stick with 10 for now).

The whole purpose of this is to exercise money management. You only risk a total of 10% of your capital set aside for swing trades on any one stock. And for every 10% you put down on a trade you maintain a stop loss on the trade (stop loss is where you sell your shares in order to protect your money if the trade goes bad). The value you use for a stop loss will vary depending on your tolerance for pain vs. the reward potential your after but the recommended value is between 2% to never more than 8%. In other words for every trade you enter you NEVER let that trade become a loss of more than 8%... ever. No exceptions!

The methodology here is that by controlling your loses to a small amount then the winning trades will make up for and surpass the ones that don't work out. In the stock market you always pay more attention to the trades that are not working to protect your capital and you let the winners take care of themselves.. There will be much more on this topic over time.

You must be disciplined in order to be successful at the stock market. This goes for any type of trading style.. Even buy and hold investing must have a point at which you say to yourself.. this stock is no good and you move on. Dead money makes no money..

There will be much more on stop loss and money management in future posts. If you are new to the stock market and don't have your own money management plan already established I highly recommend you read one of the books from Dr. Alexander Elder. Dr. Elder details how to properly use money management and teaches some aspects of the psychology of trading. And to be disciplined. There are many good books on swing trading and technical analysis. The books on the right hand side of this web page are all highly recommended. I have read them all ( and many more!) and they are highly recommended. Another good book to read is "Trading in the Zone" which focuses on the psychology of the trader and how to develop the discipline to win in the markets.