Monday, June 12, 2017

"Buy n Hold"  is a   Flawed Strategy


Lately I have been talking to a lot of traders who want to sign up for my   "Mentoring Program".  They seek me out because they are failing to make progress with their trading.  I get very similar questions from my followers on Twitter and Linkedin as well on a daily basis.  What I have found is that there is a very important mind set that is missing in their approach to trading.  I blame it on the so called  'GURUS'  that so many traders get caught up with.  You all know who they are because they are on CNBC, FOX, CNN, and Bloomberg tv everyday.  Some of them handle hegde funds and have $Billions on hand to make those trades.  We are Retail traders and investors.  We have limited capital resources to work with.  In order for us to outperform the general market, we have to constantly get into a trade, harvest profits and use that capital to get into another trade.  Buying a stock and holding onto it for the long term - 5, 10 or 20 years - is not a profitable strategy to employ.  Traders understand that when they but a stock, they have their entire capital at risk.  What they fail to grasp it that there is also a time risk.  Longer that you hold onto the stock, greater the risk you are exposed to with your capital. 


Friday June 9th we had a reversal in the market.  Technology Sector (mostly chips, software and internet related stocks)  took a beating.  $QQQ  index that I monitor was down    -2.47%  that day.  This index has been the leading index  +21%  YTD year to date)  This is a phenomenal performance and we as Retail Traders got greedy.  Hardly anyone that I talked to, did anything to have an appropriate   trailing stops   on their positions.  In my post last week, I gave a heads up to my readers to seriously look at having a trailing stop on their position.  Monday morning before market open, I suggested trailing stops on 38 of those winning growth stocks to protect profits in the trade.  They were revised up 2 days later to secure higher profits as the market continued to move up. 

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