TIMterms

1. ANALysts

These are people who analyze companies and put out research reports with their takes, assigning naive price targets. Considering they're right about 30% of the time, I don't put ANY stock in them, other than being wastes of space, they are only somewhat useful because their opinions are often peddled onto naive firm clients and promoted via the firms network of scum-sucking commission-earning brokers, hyping undeserving stocks, creating excess Volatility, Liquidity and Short Selling opportunities. Related: Short Selling, Volatility, Liquidity

2. Buying To Cover

Closing out a short position, ideally not during a Short Squeeze. See detailed explanation of Short Selling HERE Related: PennyStocking, Short Selling, Short Squeeze, Max Pain

3. Compound Annual Growth Rate (CAGR)

Year-over-year growth rate of your investment used by financial drones / planners everywhere to stress the value of long-term investing. I love compounding my assets, but definitely not on a yearly-basis, I'm more interested in compounding weekly or monthly so I can take bigger dollar positions in my trades because if I stay true to PennyStocking, the odds are in my favor on every trade I make so I want to make as many trades using as much capital as possible, yielding me the greatest profits over time.

4. EBITDA

Earnings before interest, taxes, interest, depreciation and amortization. Yup, a semi-complex figure companies used by companies to express profitability if not cash flow. Companies love using this to make themselves look better and many takeover and mergers are based on it, so you have to respect it even if this Wall Street gimmick makes you cringe. Oh, and it's pretty irrelevant to Pennystocking, since the businesses of the stocks I trade are so pathetic that no amount of number fiddling can ever make them look good--kinda like midgets trying out for the NBA.

5. EPS

Earnings per share, meaning the $ amount of profit a company earns over the past year divided by stock price. Sissy value investors love quoting this figure because they believe that a stock is valued based on a company's business, long-term. PennyStocking cares little about the long term--by then, we're all dead and since we assume the worst of every company (so we'll never be disappointed)--as corporate accounting can be fudged, seemingly-minor-but-in-reality-important items can be played down, business is ALWAYS worse than a company will ever fess up to. While we don't ignore this figure completely, we judge a stock on its price action and trading volume, considering that directly applicable to our short-term trades. Related: PE Ratio, PennyStocking, ANALysts

6. Max Pain

The point at which short sellers can no longer take the pain as the stock keeps surging higher against them, the losses are out of their comfort zone--they simply must stop the bleeding, Buying To Cover their short position. For the patient short seller, if you wait for short sellers to experience this phenomenon, creating a Short Squeeze--as evidenced by an utterly ridiculous quick surge in price--it's an ideal entry point as the Risk-Reward Ratio becomes favorable. Related: PennyStocking, Short Selling, Short Squeeze, Buying To Cover, Risk-Reward Ratio

7. PE Ratio

Stock price divided by company earnings, as expressed in EPS or earnings per share. A trailing PE ratio is based on the past four quarters and a forward PE ratio is based on the expected earnings for the next four quarters. Sissy value investors believe a company's PE ratio is representative of a company's growth rate--a faster growing company is said to deserve a high PE ratio and thought to be riskier than a slower growing company with a low PE ratio. If a fast growing company has a low PE, it's thought to be undervalued just as a slow growing company with a high PE is thought to be overvalued. That's all well and good, but PennyStocking teaches us earnings can be manipulated, ANALysts earnings estimates aren't very accurate and most importantly, there are unpredictable time lags involved in everything--for example, a company with a low PE based on stellar trailing earnings might look like undervalued, but industry insiders understand they are based on a past product whose future is in doubt. Naive investors who invest based on the low PE get themselves into a company whose future is in doubt. Unless you want to do hundreds of hours or research checking with all a company's clients, partners, resellers and competitors, you can never get a very accurate picture of whether or not a company is under or overvalued. Related: EPS, PennyStocking, ANALysts

8. Penny Stock

A stock trading below $5 per share. Some people say under $1, some others under $10, whatever, there's no right or wrong definition--basically any low priced stock. When stocks are priced so low, investors have little expectations of any huge success or industry dominance, so prices move based on speculation that the company might hit it big. Given that the odds are against them, when any announcement of a new product, solid earnings or coverage by ANAlysts or pumping by stock promoters, the upside appears limitless--even though it's not--as the vast majority of upside catalysts are supremely temporary and tons of suckers buy in only to feel the pain later on. Related: ANALysts, Stock Promoter, Pump & Dump, Volatility, Liquidity, Worthy Trade

9. PennyStocking

My investment strategy detailed in a 6-hour instructional DVD and 220-page instruction manual PACKAGE teaching people to profit from the wild swings of penny stocks when they are in play, both from taking long and short positions to be held for a few hours, days or weeks, but no longer. Penny Stocks often move like pendulums so I'm not exaggerating when I say it's possible to ride them on the way up and short sell them on the way down--just as I earned my first $1 million from buying and selling thousands of these stocks during the mania in 1999 to 2000 and my second $1 million by short selling them on the way down from 2001 to 2006 (as detailed in my book An American Hedge Fund) While respecting the hype, pumps and blatant manipulation, never give in or believe any of it as not only are these the worst publicly traded companies in the world but they're managed by the worst and promoted by the most unethical business people in the world. Related: Short Selling, Penny Stock, Stock Promoter, Pump & Dump, Volatility, Liquidity, Worthy Trade

10. Risk-Reward Ratio

The expected profit for a trade versus the risk taken on and the potential for loss. The determining factor in whether a trade is a Worthy Trade or an Unworthy Trade Related: Short Selling, PennyStocking, Worthy Trade, Unworthy Trade

11. Short Selling

Betting on a drop in stock price by selling shares you don't own (taking a negative position) in order to profit by buying those shares back--or Buying To Cover--at lower prices. See detailed explanation HERE Related: PennyStocking, Short Squeeze, Max Pain, Buying To Cover

12. Short Squeeze

When short sellers are forced--either by their broker, losses or Max Pain--to close out their positions, or Buying To Cover. This often causes violent price surges as short sellers trample each other to buy the stock, no matter the price. For short sellers, there is nothing scarier than getting squeezed, but if you wait to short until after these squeezes have pushed prices to irrational levels, or Max Pain, the Risk-Reward Ratio of your trade is significantly heightened. Related: Short Selling, PennyStocking, Buying To Cover, Max Pain, Risk-Reward Ratio

13. Unworthy Trade:

A trade in which the Risk-Reward Ratio is NOT in your favor, meaning that after doing all your research and considering ALL the variables, you believe the loss potential and the probability of losing in the first place, outweighs the profit potential and the probability of profiting. Also consider the potential $ profit vs. the potential $ loss and the opportunity cost—after all, the vast majority of potential trades out there don’t have great odds of success so you must learn to ignore them. This is not an easy lesson, and the failure to learn it is directly responsible for the fact that 90% to 95% of all traders lose money. Here are some examples of unworthy trades that I didn’t realize were unworthy until it was too late, learn from these mistakes: http://timothysykes.com/2008/03/24/i-had-a-rough-day-aka-no-playboy-centerfolds-for-me/ http://timothysykes.com/2008/02/26/lack-of-patience-and-discipline-causes-trading-losses/ There are millions more examples, but since I’ve gotten somewhat good at ignoring random trades, you won’t read about any of them. Smaller traders especially must understand how precious their capital is and choose to avoid the vast majority of potential trades. Related: Short Selling, Worthy Trade, Pennystocking, Risk-Reward Ratio

14. Volatility

How quickly and how much a stock moves. I prefer hugely volatile stocks because their huge price swings allow for poor timers like me--and the vast majority of people out there--to hop on and off somewhere along the ride, both from the long and short sides. Never wait for or try to guess when a non-volatile stock will become volatile, simply focus on the stocks that are already volatile. You must learn to ignore certain types of volatility for they are one-time events and not representative of fickle day traders, who we want to be involved. Related: PennyStocking, Short Selling, Upside Catalysts and Downside Catalysts

15. Worthy Trade

A trade in which the Risk-Reward Ratio is in your favor, meaning that after doing all your research and considering ALL the variables, you believe the profit potential and the probability of profiting in the first place, outweighs the loss potential and the probability (hopefully only a possibility) of losing. Also consider the potential $ profit vs. the potential $ loss. Here are some examples of worthy trades: http://timothysykes.com/2008/02/26/after-the-morning-rain-comes-the-afternoon-sunshine/ http://timothysykes.com/2008/03/09/a-scary-perfect-short-into-a-slumping-supernova/ http://timothysykes.com/2008/03/26/how-to-bake-a-25-overnight-profit-cake-and-eat-it-too/ http://timothysykes.com/2008/03/30/how-to-make-8-returns-before-lunch/ http://timothysykes.com/2008/04/07/how-to-predict-10-daily-price-moves-with-relative-ease-pennystocking/ http://timothysykes.com/2008/04/09/hard-to-borrow-stocks-short-sell-what-you-can-only-when-key-prices-are-breached/ Related: Short Selling, Unworthy Trade, Pennystocking, Risk-Reward Ratio