Q. What is a basket?A basket is a group of up to 50 stocks that you can trade, manage and track as one entity.
In another article, I wrote about a rather conservative method of being in
stock market. See: "A Triple Dipper: How to Make 3 Profits on 1 Stock" at http://www.traderaide.com/Selected_Articles/Tripple_Dipper.html.
This time let’s talk a little about trading "baskets". The definition above maybe needs to be expanded just a bit. You can trade baskets using longer term buy and hold strategies, a shorter-term swing trading approach or as a day trader. A basket of stocks is nothing more then any group of stocks that someone has grouped together for any of a number of reasons. They may be of same sector, or they may be made up of a number of stocks in different sectors. An example of a few baskets could look like what is sited below. To save time and space I’ll use stock symbols only. You can look them up later if you are interested. Let’s say you see stem cell research as thing of future and wanted to be invested in it. If you don’t know which stock is going to fair best, you may want buy a basket of stocks that is made up of ASTM GERN and STEM. This would be a basket of stem cell stocks. Now let’s say you think Internet stocks look good and, again, you are not sure which ones will do best. In your Internet basket you may want to pick up some shares of EBAY, YHOO and AMZN. Obviously your basket can contain any number of stocks you want. Many online brokers will actually allow you to set up baskets in your account, and you can put in a sell order all at once on entire basket or pick and chose which ones you want to sell. I’m not recommending these stocks in any way, shape or form, but merely using them as examples.
Okay, that’s pretty basic, but I’m sure you get picture. The examples above would more or less be type of baskets you would probably be thinking of holding for some time and not day trading.
Most day traders have an entirely different kind of basket of stocks. A day trader may have any number of stocks in his trading basket that he or she has been become very familiar with. They have studied them and even charted them for intraday movement (I hope) for some time and have learned trading habits of individual stocks. They have a fairly good idea of how stock moves on a daily basis with or without news. They have knowledge of how it reacts to earnings, analyst upgrades, analyst downgrades and other events that may be reoccurring. They have also probably learned how they trade when hit by surprise events as well. They know which market makers to watch closest. They also know who main market maker in stock is, often referred to as axe.
