Wednesday, June 10, 2015

What Race are You Running?

Sprint, Marathon, Relay: What's Your Race?

In a post last week I mentioned that I'll be conducting a survey during the month of June to help my readers better understand their trading style! If you would like to take part in the survey, you can sign up here:

What's Your Trading Style? Sign Up Below To Find Out!

* indicates required


In today's post I'm going to take a closer look at the Sprinter, the Marathoner, and the Relay Racer. Keep in mind that each type of runner has a different goal in mind and, thus, they utilize different training, different equipment, and employ a different mind set. This is no different in the trading counterparts!

What's Your Race?The Sprint

In the investing world, I equate the sprinter with a day trader. Let's have a look at the most important elements of day trading.


  • Open and closes position same day
  • Uses candlestick charts
  • Not a research intensive type of investing - more technical in nature
  • Requires intuition and the ability to act impulsively
  • Requires a high level of availability during prime trading hours
  • Requires you to be comfortable with making decisions in a fast paced environment
  • $25K minimum portfolio (FCC required)
  • 95% of Day Traders lose their portfolio within 5 years
  • Broker houses don’t assume risk on your behalf


The Marathon


I think of marathoners as the long term investors,


  • Holds a position for 6 months or longer
  • Focuses on fundamentals - uses tools like Value Line, Barron’s and WSJ
  • Very research intensive type of investing - less reliant on technical analysis
  • Data centric, patience is a virtue
  • Doesn’t require daily activity during trading hours
  • Shouldn’t expect instant gratification
  • Anyone can trade this way, with a portfolio of any size
  • 75% of stocks mimic market trends so long term portfolios rarely lose value unless a bear market persists for a long period of time.  Portfolio fluctuations are usually minor and can be absorbed over the length of the position
  • Mitigating risk requires dollar cost averaging in a bear market

The Relay


The closest thing to a relayer is the growth stock investor!

  • Profit/Loss driven, length of time in the position is less important.  Holds a position until a specific profit percentage has been achieved
  • Focuses on momentum - uses tools like IBD, Market Smith
  • Somewhat research intensive type of investing - somewhat reliant on technical
  • Data driven - relies heavily on institutional behavior - you must know how to determine that
  • Requires activity outside of trading hours - not during
  • Does not expect an instant return.  Is willing to wait up to 8 weeks for their positions to mature.
  • 401(k), IRA, or cash accounts can be used for trading these stocks.
  • IBD® 50 stocks have returned 776% growth since 2003.  The S&P 500 has returned 204% over the same time period.
  • Growth stocks carry a risk of rolling over precipitously.  Requires diligent use of stops.

Wrapping Up


Next week we'll have examples of famous traders that match up with each persona! Just a reminder, the survey results will go out at the end of the month and everyone that participates will receive a free copy of my watch list!

Happy Trading!

DISCLAIMER



Do not take a position unless you are prepared to sustain a TOTAL LOSS. Your loss could include the money you invested as well as commissions and transaction charges.


The Information I provide is for education and informational purposes only. The Information provided is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice. The Information provided is general in nature and is not specific to you or anyone else.


YOU SHOULD NOT MAKE ANY DECISION, FINANCIAL, INVESTMENTS, TRADING OR OTHERWISE, BASED ON ANY OF THE INFORMATION PRESENTED WITHOUT UNDERTAKING INDEPENDENT DUE DILIGENCE AND CONSULTATION WITH A LICENSED PROFESSIONAL. You understand that you are using this Information AT YOUR OWN RISK.