There are other questions which you should consider first - there may not be an answer to all but if you personally are happy with the answers, its a good idea (for you, at this time, and that's what counts). Imagine a panel of hard-nosed investors are going to finance your trade: they're going to ask you serious questions before backing you, such as -
1. how confident are you this is the bottom?
2. where will you sell out if it turns out you're wrong, and how much will we lose? (if this is too much to bear, this is a bad strategy)
3. where will you sell if it turns out you're right, and how much will we win? (depending on how much you think the market will rise - and it won't rise infinitely - is this the best strategy to gain that number of points?)
1. how confident are you this is the bottom?
2. where will you sell out if it turns out you're wrong, and how much will we lose? (if this is too much to bear, this is a bad strategy)
3. where will you sell if it turns out you're right, and how much will we win? (depending on how much you think the market will rise - and it won't rise infinitely - is this the best strategy to gain that number of points?)
I think you need to look more closely at how a leveraged ETF works - depending on the scale of volatility if is only effective over a daily/very short timescale. Of course, if you can pick that day...
You might have to wait years. Even if the market goes down sharply, how do you know when the bottom is in?
In 2008, I was all in cash, fearing a big market correction. What I did when the market started selling off in earnest, was to gradually put money into a stock market index (although not leveraged) as the market fell, so that by March 2009 I was 100% in stocks. I suffered a small loss up till then, but a huge gain in the rest of 2009 and 2010, at which point I pulled some money out of stocks and into other investments.
NVP
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Everyone wants to buys at the bottom of a market dude
But the devil is in the detail. :smart:
N
Re:
i plan to DCA into investments at dips...not necessarily waiting for the big one to throw it all in
i plan to DCA into investments at dips...not necessarily waiting for the big one to throw it all in
Buy the dips, sell the rips. That can work well. Just be careful about using too much leverage in case the market moves against you.
I'm using a mean reversion algorithm (statistical arbitrage) for trading, which is a similar idea. When a portfolio moves strongly in one direction, I bet that it will return to equilibrium. (The difference is that I'm trading a cointegrated portfolio rather than a single instrument.)
