Never Be at the Mercy of Big Traders Again

Keith Fitz-Gerald Nov 06, 2015
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When I started Total Wealth I promised you that we’d not only cover the top money making opportunities of our time, but also the trades, tips, and tactics needed to maximize your wealth.

Today I want to keep that promise with a look at the Lowball Order.

We’ve talked about lowball orders before. But now, with the markets dancing around new highs and the Fed making noises about a rate hike in December, I think it’s a great time to revisit the subject.

This is a discussion you don’t want to miss because lowball orders are one of the simplest, yet most powerful Total Wealth Tactics available to individual investors today. Plus, they’re a great equalizer.

What I mean by that is you can use lowball orders to take away the advantage normally enjoyed by Wall Street’s biggest, most ruthless traders. And, in the process, buy the stocks you want at exactly the price you want to pay.

I believe you’re gonna be thrilled by how easy this tactic is to use, especially when you understand that you don’t have to sit in front of your computer screen all day to bank the kind of profit potential most people only dream about.

Here’s how to become a Market Master.

I’m often asked during presentations around the world for my favorite money making tip and without fail I come back to the Lowball Order every time for three reasons:

  1. You can place Lowball Orders in advance
  2. You don’t have to be at your computer to lock in profit potential
  3. You control risk by buying only when the stocks you want are trading at exactly the price you want to pay.

Using a lowball order is pretty simple.

First, you line of with one or more of the Unstoppable Trends we’re following: Technology, Medicine, War, Terrorism & Ugliness, Demographics, Scarcity/Allocation, Energy.

Second, you select a stock that’s beaten down or otherwise out of short-term alignment with long-term valuations, fundamentals, and earnings potential. Ideally, it’s not just any old stock. I talk frequently about maintaining a “buy list” of companies you want to own if you get the opportunity to pick them up at a dramatic discount. To me, this is Apple at $70, Tesla at $200, or even Facebook at $60. Your list may differ; my point is that you have a list… at all times.

Third, you pick an entry price that matches your expectations, your risk, and your belief about what your intended purchase is really worth.

In most cases, lowball orders align nicely with logical “support” or previous lows that can be chosen based on the time frame you’re trading. While there is no hard-and-fast rule here, many traders find being within 10% and 15% of the most recent annual low is fertile hunting in choppy markets.

And, finally, you place your order to “buy XYZ at $ or less GTC” – meaning “Good till canceled.”

Then you wait for prices to come to you. Why really doesn’t matter. It can be an overreaction to “bad” news, a sector pullback, a down day in the market, China, Putin’s latest move, or anything else that causes emotional angst.

What you’re hoping to catch is exactly the type of unusually large market move that crushed so many investors on August 24 when the Dow plunged 1,000 points. Your goal is to buy at levels others believe are “impossibly low” at a time when your competition is not thinking clearly.

Now, what I am talking about is NOT market timing.

Lowball orders are very carefully planned “profit-traps” that are laid out in advance. You set them in place to take advantage of conditions that favor you as opposed to the institutional traders who normally dominate the markets and whose express goal is to separate you from your money.

The Mechanics Are Simple

Lowball orders are technically “limit” orders. That’s Wall Street-speak for an order to buy or sell shares at a specific price or better. Unlike “market” orders which go into effect the moment you place them, limit orders trigger only when prices reach the limits you’ve specified.

So, for example, Apple is trading at roughly $120 a share right now but you think $110 is what you’d like to pay. Obviously nobody knows whether the stock will drop to those levels. But that shouldn’t stop you from preparing for the possibility.

The point of a lowball order is to pay the price you want. Whether that happens today, tomorrow, or six months from now is moot. To paraphrase my grandfather who played baseball in the 1920s, you miss 100% of the swings you never take.

Lowball orders help you prepare in advance for conditions that favor your money. Placing them doesn’t cost you a thing and you’re not risking one red cent until the order executes and you’re off to the races.

Let’s look at a few examples.

Disney took off on a furious run last January, leaving anybody not on board in the dust. On August 25 the stock tumbled to $90 a share. Yesterday it closed at $113 for a quick 25.55% gain.

lowball chart

 

The same day, Apple fell to $92 a share. It closed yesterday at $120.92 for a 31.43% gain.

low ball chart 2

There were dozens of high quality stocks that got shellacked on August 25 and every single one of them was ripe for profits on the rebound… but only if you were prepared to act.

Limit orders do have some limitations worth noting, though.

For example, there is no guarantee that a limit order will execute if there is too much price movement or prices blow past the limit or never reach it to begin with. In other words, a limit order guarantees the price you specify “or better” but not necessarily that your order gets executed.

That used to be a big deal back when floor traders did most of the trading and the markets lacked the liquidity they have today and spreads were quoted in fractions. But now volume is much higher and spreads are in decimals. There’s also computerization, which has heavily influenced order flow.

Depending on how sophisticated you want to be, you can tack on special instructions. Most commonly that’s things like the “GTC,” which stands for “good till cancelled” that I’ve already mentioned. Others include “GTD” which means “good to a specific date” you pick or “AON” which means “all or none” as in the trader have to fill all the shares requested in a single trade.

Here’s a Lowball Order You Can Use Right Now

Raytheon Co. (NYSE:RTN) has proven to be a fantastic recommendation for Money Map Report subscribers for good reason. Subscribers who are following along as directed in the Money Map Report have had the opportunity to capture gains of at least 100% and are now sitting on total returns of 177%.

Folks ask me all the time if they can “get on board” with the trade because Raytheon still has so much potential. In a word, “yes,” – but not by chasing performance.

Buy low, sell high is the path to profits.

What you want to do is pick up shares of Raytheon at a discount, then sit back and let everybody else who actually does chase performance do the dirty work for you.

In looking at the Raytheon chart, it’s apparent the stock goes in spurts. That means it’s tailor-made for Lowball Orders because prices periodically drop to key support levels that give fresh money a terrific opportunity to push prices higher (again).

A price of $95 – $100 per share looks pretty appealing because that’s where traders have duked it out earlier this year and for much of 2014, too.

lowball order chart

So, for example, assuming you want to buy 100 shares at $95, the Lowball Order you’ll want to put in play with your broker or your favorite online trading platform would read as follows:

Buy to open 100 shares of RTN limit $95 GTC.

…that’s “buy” because you’re buying shares.

…”to open” because you’re initiating the trade.

…”100 shares” because that’s what you want to own.

…”RTN” because that’s Raytheon’s ticker symbol.

…”Limit $95″ because that’s what you want to pay and not a penny more.

…”GTC” meaning good till you cancel the order or it’s executed.

At the end of the day, it doesn’t really matter whether you are placing lowball orders as an investor or as a day trader. Your goal is the same – to profitably harness quick swings that drive most investors straight to the poorhouse.

Lowball Orders work because every great company gets put on sale periodically for reasons that have nothing to do with the business case for owning them: Visa, Google, Apple, and Gilead just to name a few. There are no exceptions.

That’s why it makes great sense to line up your share of profits ahead of time then wait for everybody else to panic and bring the prices to you on your terms.

And just when is that going to happen?

I think the Fed’s December rate hike is a good candidate.

Until next time,

Keith

16 Responses to Never Be at the Mercy of Big Traders Again

  1. Johnfolsom says:

    Looks good to me I will enter the order!

    • Keith says:

      Good morning John.

      Fabulous and glad to hear it. However, as is the case with ANY investment, make sure it fits with YOUR investment goals, objectives and risk tolerance.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  2. R. J. says:

    Used the “lowball order” on a recent IPO. So far, up about 10%. Not stellar, but I’m anticipating more appreciation.

    As you have written before: “always have a list.”

    That’s great reinforcement.

    As General George S. Patton stated:

    “A good plan, violently executed now, is better than a perfect plan next week.”

    • Keith says:

      Morning RJ.

      Sounds like you’re off to a great start – keep it up! Lowballs work on any investment in any time frame from IPOs to long term core investments -and that’s what makes them so powerful.

      As for Patton, that’s very well put. If you haven’t read it, check out Patton’s Principles, a Handbook for Managers Who Mean It! by Porter Williamson. It’s one of my favorites and something I re-read periodically because the lessons related by Mr. Williamson’s first person accounts are exceptionally good. There’s an update but I still like the original 1982 edition: http://amzn.to/1kGT9tN

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  3. FRANK ELLISOR says:

    SOUNDS LIKE A VERY GOOD WAY TO BUY STOCKS AT A LOW (REASONABLE) PRICE. I WILL GIVE IT A TRY. THANK YOU!

    • Keith says:

      Hello Frank and glad to help.

      Please keep us posted and let us know how this works for you. Don’t forget appropriate risk management once your order kicks in:
      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  4. Barry says:

    Hi Kieth,

    Love the low-ball tactic and was able to pick up shares of companies on my want list below where I expected them to be

    Thank you for introducing me to the tactic awhile back, think u were discussing HAL at the time
    —————

    Just as a reminder, Esko just came out with earnings and of course big players are selling it so its down 10 %, ( still above my buy price- ) and at midday its already above the daily volume

    Here is a link
    http://ir.eksobionics.com/press-releases/detail/559/ekso-bionics-reports-third-quarter-2015-financial-results

    to me are positives and negatives , Revenue skyrocketed but overall profit flat as of course money needs to be spent to add new technologies to older machines, etc but sales are increasing, all in all its to much for me to understand’ in regards to a yet still small company . & the FDA of course still wants supporting documentation to how its classified & to obtain their clearance for the Ekso robotic exoskeleton, which I am sure is standard procedure but probably looks bad in print

    Please review and give your opinion

    Also Re your other special report company – CWCO on NOV 10th will hold a conference call to discuss 3rd quarter results & results usually reports said results after the bell the day before said call
    http://ir.cwco.com/file/Index?KeyFile=31717666

    Again this will be beyond my abilities to interpret

    I fully realize these are long term, few years at least to see indications on how they are doing but really would appreciate updates, on both and you are my guide for these , Know i asked for updates before so sorry if sound like brken record

    Both companies touch me as I have spinal cord issues and water scarcity is a world issue of increasing importance

    Thanks Barry

    • Keith says:

      Hello Barry.

      Thanks for the kind words and I’m thrilled you’re using the Lowball Order effectively!

      As for Ekso…stay tuned. I’m working on a review now. We’ll work on the water, too.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  5. fallingman says:

    Yeah, excellent strategy, one of the charms of which is that you’re likely to be getting in before an oversold bounce.

    So, even If the stock is destined for lower levels, the bounce allows you to put a stop loss in at breakeven or thereabouts. and have some cushion … with no risk in the position, assuming there isn’t a waterfall drop or a catastrophic disruption to trading. That ability to create a cushion and exit if the tide turns lower is important, because big selloffs don’t always turn around as politely as the one in August did.

    The central banks won’t always be able to just paper every crisis in perpetuity. Gotta think defensively. Capital preservation comes first.

    • Keith says:

      Morning Fallingman.

      Well said, as always. While the tactic as I’ve discussed it here is about entry, you’re spot on when you mention the other side of the trade – risk management. Many people forget that you’ve got to watch a position even if you get it on the cheap.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  6. Doyle Johnson says:

    Great article Keith, clear, simple & its works, I have made more money on JNJ the past year than all my other stocks combined doing exactly as you stated, however I tend to put almost all my eggs in one basket (JNJ) and buy 5000 shares at a time always using a lowball limit order. I do use margin, but the lower the entry price the more margin makes sense to me, as you can get out quicker and save on margin costs. It takes a lot of discipline to wait & wait but it has paid off for me.

    Thanks for your insight,
    Doyle Johnson

    • Keith says:

      Hello Doyle.

      Way to go! That’s some good size trading and fabulous discipline. I’m honored to have played a small part in helping you do that. Make sure you’ve got your risk management under control. Even companies like JNJ get bumpy at times.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  7. John R Stockhausen says:

    RE: Keith, Again, thanks so much for all of your information you send. Keith, there is one conclusion I’ve come up with when I look at your (Stock Charts) in this email. Specifically, I’m talking about the (Horizontal Lines) on your charts.
    I think what I’m missing is (How to read Charts & understand all the different lines). Keith, is there a possibility that you could explain (Chart Reading)???? The sooner the better.
    Again, thanks so much for all you do.
    Sincerely Yours, John

    • Keith says:

      Hello John.

      You are very welcome!

      I’ll be happy to do a chart reading primer; thanks for asking. In this case, the lines running horizontal are pointing out prior support and resistance because those are logical lowball order points. The key is to find a relatively contested price point because you’ll know that (other people’s) emotions are running high and that they’re not thinking clearly…even though you will be.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  8. Anna says:

    sound simple, intriguing, intelligent.
    I will give it a try

    Anna

  9. Ken Wenker says:

    Using your example (wanting Raytheon at $95), wouldn’t you be better off selling a put for about a $97 strike price? If the stock dipped below the $97, you’d get the stock at about the same effective price, but you’d also get some extra money for the put, even if the stock never fell. Maybe they don’t call it a “lowball order”, but the effect is about the same. Or is there something I don’t understand?

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