I’ll give you an example, where I’ve got lessons to learn.
I believe the pro’s trading this market are using aggressive bets to profit on the incredible volatility. They are essentially making educated guesses on the tops/bottoms of the extreme market swings, but here is the key point: they are protecting capital with comprehensive use of Stop Loss/Stop Limit/Limit orders.
Look at this morning. I sensed the bottom at -4%, but I was handicapped by my fears about betting a six figure amount of money long.
Here’s what I should have done.
When the markets stalled at -4% I did sense the bottom. My wife was standing next to me and I said to her, “We gotta go long. Look, here is another nice fool’s rally forming. I’m going to get another hundred grand bet on this one.” I started walking to the PC to place that trade and I got nervous about the risk, so I only placed a 1.5% (of portfolio) bet with option calls on the S&P500. I should have immediately bought $100K of SSO (or QLD) to go 2X leveraged long the S&P500 (or NASDAQ).
Then I should have put a STOP LOSS just 1% under my buy price, and let the markets roam UP and UP (or stop me out if they fell)
That strategy would have SAFELY earned me over $18,000 in less than eight hours! (Indexes closed UP a full 9% off that morning low, and SSO is 2X leveraged)
I need to get smarter!
Now I did make some smart plays today. I bought oil stocks in the morning (that paid off by 7% to 10% by end-of-day). I also made a couple percent trading gold from 790 to 805, intraday. And I made money on buying the China fund early in the morning. And later in the day I did finally buy (just $10K) of SSO , but I got nervous again (didn’t use a stop) and so I sold it for only a 2% gain in a day when I should have made much more on that play. Oh well.
The good news is that I have recovered ALL my losses (suffered in that horrible first week of October), and now I’ve even added to previous gains. That puts my portfolio up over 40% net for the last 12 months, and my wife’s ROTH is now up about 45%. She’s thrilled.
