Surfin the Market by Michael

Oct 23, 2009
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#1
I've wanted to start a journal here for some time and so..there is no time like the present.

These days I am a simple trend follower. I find 10 assets, stocks or mutual funds and start buying as they move above either there 7 day simple moving average or 21 day exponential moving average, which ever is lower, no stock going beyond 10% of my holdings. Hold as long as they are above both, which may be a very short time. Begin to sell the asset as it moves below what is now usually the 7 day average.

I'll use some discretion at the speed of my selling, needing to be out before it moves past the 21 day average. I'm also willing to short and/or find negatively correlated assets to ride waves down, though I won't commit to down markets as fully as I do for up. Mostly I want to be out.

The big point is when the market moves up or down to ride it. Not to guess so much. I'll take some lumps during flat periods and during times of quick zig zag movements, but I hope to grab big chunks of the usual market waves.

Michael
 
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Oct 23, 2009
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Day 1 of journal, Dow .08 Michael .17 Today I win!!!!! (a little bit) Celebrate your wins, even small ones cause there'll periods where you'll be dry.

Q. of the day, is it better to win dumb or lose smart?

My answer: Lose smart, follow your rules, be disciplined. Getting away w/ crap or luck only makes you more likely to keep making crappy decisions. Hope is not a strategy nor is being lucky.
 

JRP2891

Well-known member
Dec 12, 2008
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#3
I've wanted to start a journal here for some time and so..there is no time like the present.

These days I am a simple trend follower. I find 10 assets, stocks or mutual funds and start buying as they move above either there 7 day simple moving average or 21 day exponential moving average, which ever is lower, no stock going beyond 10% of my holdings. Hold as long as they are above both, which may be a very short time. Begin to sell the asset as it moves below what is now usually the 7 day average.

I'll use some discretion at the speed of my selling, needing to be out before it moves past the 21 day average. I'm also willing to short and/or find negatively correlated assets to ride waves down, though I won't commit to down markets as fully as I do for up. Mostly I want to be out.

The big point is when the market moves up or down to ride it. Not to guess so much. I'll take some lumps during flat periods and during times of quick zig zag movements, but I hope to grab big chunks of the usual market waves.

Michael
Looking forward to reading this. How much do you risk %-wise on each individual trade? How do you scale into the trend to get to your 10% max holding...are you using price action signals, ATR numbers or just gut feel?
 
Oct 23, 2009
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Looking forward to reading this. How much do you risk %-wise on each individual trade? How do you scale into the trend to get to your 10% max holding...are you using price action signals, ATR numbers or just gut feel?
Good questions. Ideally I have about 10 holdings (stocks or mutual funds, preferably non-correlated), so I can keep up to 10% in them. I'm almost always holding some cash, as the whole market drops below the 2 moving averages I'm holding quite a bit. Since I'll play with 2x mutual funds like the QLD/QID (2xQQQQ's pair) there exaggeration tends to make up for less then full market commitment.

Jumping into a trend is fuzzy. I prefer being conservative and not overtrading. I'd rather start with a limited playing field of 20 or 30 stocks that I can understand fundamentally and technically (in my simplistic way) and pick 10 that are heading in my direction. With an up market that usually means grabbing on to stock that is already above its 7 and 21 day averages.

I'd rarely 'buy in' the whole 10% maximum of a stock at once. I'd rather buy 30 to 50% at a time depending on my gut, then buy if it goes higher or leave if it drops.

How much do I risk? One interesting thing about using the moving averages is that I tend to have every stock I own up. That certainly wasn't the case in the past when I'd have stop losses at a certain % or resistance point. New positions are precarious and get cut quickly, successful ones run longer. The better they do the higher they rise above there moving averages, I don't have to follow them as closely. (until days like today damnit). I'll sometimes use RSI and MFI to confirm my bias's when I add more.

Again w/ a stock I've had for a while its usually the 7 day moving average (I like barcharts.com) that tells me its time to start 'harvesting'. I do consider points beyond stock price, what news, rumors and/or dividend issues may be moving the stock. That affects how much I'll sell, if it drops to the 21 day ema I must sell.

This may be heresy, but when it comes to buying and selling I'm no longer as interested in the best point. I want to capture the big moves, not worry about tops and bottoms; or getting the best fill.

I've been investing for many years. This system feels right, but I've only been following it for about 7 months. In that time it has gotten me out of the market on some nasty drops and allowed me to make money on the up cycles.

As I gain confidence I'll probably start loosing my 'gut' and playing by firmer rules. I'm thinking about adding rules for partial (20 or 33% of holding) OTM covered calls on holdings that have moved up 6 or 8%. Gracefully letting a portion of them get called away at a nice profit, or playing the short call for a percentage or two, and/or just buying more stock at or near the call price. (This is a maybe, I like to keep things simple, but I also like having stocks 'earn' there keep).

I've written a few papers on why I like the double MA system. I'll start putting them out here for critique. Its simplistic, but hopefully not naive.

In the mean time I'd welcome any thoughts people have.


Stay loose, Trade Well, Don't fight the Market

Michael

To be honest today was a poor showing. My China & S. Korean ETF's were hammered. S. Korea posted poor 3rd quarter growth, just .7%. It went way down, below 21 dma. I sold out, made a small profit on it, but the majority of my gains evaporated. I sold half my China ETF, but may get back in. I'll look for other Intl growth opportunities other then Korea. Maybe just stick to the Vanguard Emerging growth. Also more evidence of using little Covered Calls when things are up to catch and hold some profit.

For the record DOW down .40%, I was down .70% . :(
Actually if I wanted to be anal retentive and make myself feel better I could take into consideration the dividend caused drop on OKS. If I consider the coming dividend (& why not) then I'm down .56%.
 
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JRP2891

Well-known member
Dec 12, 2008
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#5
Thanks for the clarification. Do you trade full-time Michael or do you fit this around a job? Have you got plans to roll this out over any other asset classes if your strategy performs well?

With reference to you making a move towards more rule based trading, i'd probably say that was a good idea, as a lot of your decisions sound like they can be quantified. Ironically it could be that your 'gut' is telling you to go rule based.
 
Oct 23, 2009
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Ironically it could be that your 'gut' is telling you to go rule based.
:LOL:


It is my official job, though I've taken to heart the advice that good trading is boring. There are so many whip saw movements in the markets, its easy to be caught up in position changes. A good day is a day I do nothing. I find in this market its been better to be wrong doing nothing, then wrong doing something. That will probably change when the market takes a major downturn.

I'm no longer following the sirens call of options. They move too fast, become too emotional. The 10, 20 50% moves end up creating more drama then I want at the moment. (Except for expiration day, where I allow myself to place a few conservative option bets).

Making 1 to 3% a month is what I need and so far what I can do. We've been operating in a relatively friendly market this year (last 5 months anyway). I'm conservative and skittish. I want to protect myself against the 5 or more % drops that occur regularly and found covered calls weren't doing the trick.

My thinking lately has been moving away from individual companies and more into ETF's. The thinking is they run 'smoother'. You lose individual company risk. Maybe a big black swan is easier to see, then a small one that lands on a companies roof. Maybe..

My risk management is to begin leaving the stock/market as it drops below the 7 dma and being out when they're below 21ma. If I become automated, my 'robot worker' will undoubtedly turn Frankenstein creating huge numbers inter day ins and outs as I move along an average. I'd rather keep half an eye on the market, know my watch points and ease into and out of them.



Michael
 
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Oct 23, 2009
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Here is some regurgitation, the first few paragraphs are not mine. Usually I like to give credit where do, but in this case I unfortunately don't have it:

-Benefits of using simple 21 day moving day average to time the markets.

If you made your stock market buys in the beginning of 1995 and held them until June 09, 2009, you would have a total return of 91.5% or 6.4% annualized not including investment costs. An Investment cost of 2% per year would reduce that value accordingly. While this may seem reasonable, you could have made a similar return with a good bond strategy with a lot less risk. This is a best case scenario. If you had invested at different time, you could easily be in a negative position. So why bother to participate in the stock market at all?

The common investment rational suggests that you have a mix of stocks, bonds, and some anti inflation securities like gold to maintain a balanced portfolio and an asset mix suitable to your risk profile. This is common investment advise, However, in this market environment, we are unlikely to see the types of returns of the past for quite a while. That is why it is important to see if greater returns can be produced by using a more intensive strategy. By intensive we mean, you have to participant more in your own investment decisions by using a few market indicators and by developing a plan you can live with.

If we plot a simple 21 day moving average over the monthly S&P 500 index, as shown on the chart above, we can create a simple long term timing signal of when to be
participating in the stock market or, when to go long and when to go short. We also calculated the returns for you to see how they improved using these simple strategies.
Although these are a simple strategies to time the market, your own psychology will be a contributing factor in determining whether you will follow your signals.

The timing is determined when the market price penetrates the 21 day/month moving average, either on the long side or short side. Also, in position trading, you hold the security until the market determines when you get out. This holding period could be from days to years. With all the talking heads on the financial networks, it is difficult to know what to do because they have so many varying opinions, often from some very respected advisors. So who are you going to believe? Our view is that price is the determining factor and the only thing that is real and current. So we let the markets do the timing for us and use seasonality data as well.

Again from the chart above, taking positions in 1995 from the long side only, returned a total return of 237% or 16.4% annualized not including investment fees. In other words, you are in the market only when the market price is above the moving average. This return could be improved by investing in low risk bonds or money market funds while out of the market. That is quite an improvement over the buy and hold strategy that returned only 6.4% and with a very simple indicator.

We can even improve on this number buy going short the market when we get the appropriate signal. Going short, for most individuals, appears to be a daunting task, but in reality is quite easy. For those who don’t want to consider going short, there are many inverse ETF’s (Exchange Trade Funds) that track all types of indexes and commodities that rise in price as the market goes down. These are as easy to buy as a common stock.

By participating on the short side of the market we improved our total return to 301% or 21.13% annualized not including investment fees. Now we are making some substantial returns with a very simple long term investment strategy. We know of course, hind site is always 20-20, and looking into the future is guess work at best, especially in times like these. We must keep in mind that historical evidence is all we have to try to predict the future. Also, that most money manager rarely beat the index and as a result trillion of dollars have been lost over the last year globally on the advise of supposedly sophisticated money mangers keeping their clients fully invested.

<Notice on On Jan 19,we hit the high of 10,710 and fell, by Jan 21s we were below 10389, under the ema 21 line. I could have sold investments or loaded up heavily on shorts. Then waited til we cross the line again or approached it / velocity to begin rebuying.>

Technically w/ this method I'd have been 'In' on Nov 4th @ 98.20 and Majorly out (except for short peaks) at Jan 20 at 10480ish. Note this chart is from Yahoo. The 21 day EMA chart holds true for 1 month, 3 month 6 month, but breaks down at the 5 day level where the moving average goes from days to a shorter period, maybe hours.

IB charting gives me a similar chart, if I do the DIA 3 month chart w/ a 21 day ema. I can squeeze it into a 2 day or 1 week view, this gives me a view on how the lines are converging.

My charts aren't showing up, Oh well. The problem w/ using a 21 day is you leave money on the table. When the market moves down as it inevitably will you lose a big chunk 15-25% of the highs. What I'm doing is using a faster moving average to begin the selling process.
 
Oct 23, 2009
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#8
I feel good, nanana nanana. I know that I should now...

Another sunny day in the market, my position in Ford making it feel a little balmier. Up a nice 5.4%, letting my portfolio gain .78% vs the marktets .24%

More importantly I'm experimenting with using some covered calls, actually they're short strangle. To wit: I have 3800 shares I bought for 13.46, its now 15.22. Being tired of watching things fall down and seeing the value of it go above my 10% limit, I've put in a short strangle at 15. Nov 15.0 Calls -5 @ .75, Puts -5 @ .68. If Ford is over 15 I'll be selling 500 shares at 16.43 a sweet 22% gain($1485), and I'll still have 3300 shares. If it falls, I'll have to buy 500 shares for the equivalent of 13.58, that's okay. Ford has a P/E in the 10's. I'll probably start selling it off as it falls under 14.80's anyway.

Its strange to be so happy about a .78% increase, certainly in my option days I'd regularly have trades that made 30, 40 200%, BUT that was only on a small piece of my total portfolio. Losses could be equally high.

Fantasyland comment: If I could my .78% each day, in 10 years I'd have all the money thats out there. All of it. Everybody reading this would have to call each morning for allowance, and I'd have to tell them 'Hold on I have 5 billion other people on the line.
 
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Oct 23, 2009
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#9
Not much to report. Friday was a great day. In the past I've been a follower of Phil Davis of Phil's Stock World. I have a lesser membership. He has a thorough and holistic knowledge of economics, and his option strategies are nicely conservative. Still like so many newsletters he ends up doing so much better then his 'followers'.

I'm thinking of letting my subscription go, because I'm trying to trade simpler. Still I've learned quite a bit from writings. Indeed I have dozens of pages of his writings and quotes. Similarly I have a Best of Brett Steenbrecker (sp) file.

Thursday I noticed I was light in the Healthcare industry. So I purchased a half interest in RXL, a 2x Health care ETF, its top holdings are solid, being a 2x there is increased contango risks. Bad move. Its lightly traded, and the reason I didn't own Health care is because by and large its been an underperforming sector. My strategy is not buy and hold, its riding upward waves and getting off as they crest down (& the reverse).

My desire for diversification led me to the wrong beach. I'll get off, but I'll keep my eyes on it. Literally keep a 25 day chart on my 2nd monitor showing its 7 day sma & 21 day ema, when the chart looks strong. I'll paddle out there again.
 
Oct 23, 2009
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#10
A good day. The Dow down .32% & I'm up .06%. Nice. Thank Mr. Ford.

For my Best of Financial Blog #18 I copied down some of John Maudlin article "The Not So Simple Rules" of Trading (http://www.trade2win.com/section/articles/1060-not-so-simple-rules-trading). Here is an edited version, it nicely captures the rules a Trend trader should live by:

Thoughts by John Mauldin: <this is the meat of the trend follower>

GO WHERE THE STRENGTH IS R U L E

The objective of what we are after is not to buy low and to sell high,
but to buy high and to sell higher,
or sell short low and to buy lower.

We can never know what price is really "low," nor what price is really "high." We can, however, have a modest chance at knowing what the trend is and acting on that trend. We can buy higher and we can sell higher still if the trend is up. Conversely, we can sell short at low prices and we can cover at lower prices if the trend is still down. However, we've no idea how high high is, nor how low low is.

Sell markets that show the greatest weakness;
buy markets that show the greatest strength.

Metaphorically, when bearish we need to throw our rocks into the wettest paper sack for it will break the most readily, while in bull markets we need to ride the strongest wind for it shall carry us farther than others.<follow the trend>


MAKING "LOGICAL" PLAYS IS COSTLY

In a Bull Market we can only be long or neutral;
in a bear market we can only be bearish or neutral.

This addresses what might seem like a logical play: selling out of a long position after a sharp rush higher or covering a short position after a sharp break lower--and then trying to play the market from the other direction, hoping to profit from the supposedly inevitable correction, only to see the market continue on in the original direction that we had gotten ourselves exposed to. At this point, we are not only losing real capital, we are losing mental capital at an explosive rate, and we are bound to make more and more errors of judgment along the way. <I've gotten burned making this mistake many times>


Actually, in a bull market we can be neutral, modestly long, or aggressively long--getting into the last position after a protracted bull run into which we've added to our winning position all along the way. Conversely, in a bear market we can be neutral, modestly short, or aggressively short, but never, ever can we--or should we--be the opposite way even so slightly.


"Markets can remain illogical far longer than you or I can remain solvent."
I understand that it was Lord Keynes who said this first

Trading runs in cycles; some are good, some are bad, and there is nothing we can do about that other than accept it and act accordingly.
The academics will never understand this, but those of us who trade for a living know that there are times when every trade we make (even the errors) is profitable and there is nothing we can do to change that.

Conversely, there are times that no matter what we do--no matter how wise and considered are our insights; no matter how sophisticated our analysis--our trades will surrender nothing other than losses. Thus, when things are going well, trade often, trade large, and try to maximize the good fortune that is being bestowed upon you.

However, when trading poorly, trade infrequently, trade very small, and continue to get steadily smaller until the winds have changed and the trading "gods" have chosen to smile upon you once again. The latter usually happens when we begin following the rules of trading again. Funny how that happens!

To trade/invest successfully, think like a fundamentalist; trade like a technician.

It is obviously imperative that we understand the economic fundamentals that will drive a market higher or lower, but we must understand the technicals as well. When we do, then and only then can we, or should we, trade. If the market fundamentals as we understand them are bullish and the trend is down, it is illogical to buy; conversely, if the fundamentals as we understand them are bearish but the market's trend is up, it is illogical to sell that market short. Ah, but if we understand the market's fundamentals to be bullish and if the trend is up, it is even more illogical not to trade bullishly.

Keep your technical systems simple.

Over the years we have listened to inordinately bright young men and women explain the most complicated and clearly sophisticated trading systems. These are systems that they have labored over; nurtured; expended huge sums of money and time upon, but our history has shown that they rarely make money for those employing them. Complexity breeds confusion; simplicity breeds an ability to make decisions swiftly, and to admit error when wrong. Simplicity breeds elegance.
The greatest traders/investors we've had the honor to know over the years continue to employ the simplest trading schemes. They draw simple trend lines, they see and act on simple technical signals, they react swiftly, and they attribute it to their knowledge gained over the years that complexity is the home of the young and untested.

UNDERSTAND THE ENVIRONMENT

In trading/investing, an understanding of mass psychology is often more important than an understanding of economics.

Markets are, as we like to say, the sum total of the wisdom and stupidity of all who trade in them, and they are collectively given over to the most basic components of the collective psychology. The dot-com bubble was indeed a bubble, but it grew from a small group to a larger group to the largest group, collectively fed by mass mania, until it ended. The economists among us missed the bull-run entirely, but that proves only that markets can indeed remain irrational, and that economic fundamentals may eventually hold the day but in the interim, psychology holds the moment.


And finally the most important rule of all:

THE RULE THAT SUMS UP THE REST

Do more of that which is working and do less of that which is not.

This is a simple rule in writing; this is a difficult rule to act upon. However, it synthesizes all the modest wisdom we've accumulated over thirty years of watching and trading in markets. Adding to a winning trade while cutting back on losing trades is the one true rule that holds--and it holds in life as well as in trading/investing.


If you would go to the golf course to play a tournament and find at the practice tee that you are hitting the ball with a slight "left-to-right" tendency that day, it would be best to take that notion out to the course rather than attempt to re-work your swing. Doing more of what is working works on the golf course, and it works in investing.


If you find that writing thank you notes, following the niceties of life that are extended to you, gets you more niceties in the future, you should write more thank you notes. If you find that being pleasant to those around you elicits more pleasantness, then be more pleasant.


And if you find that cutting losses while letting profits run--or even more directly, that cutting losses and adding to winning trades works best of all--then that is the course of action you must take when trading/investing. Here in our offices, as we trade for our own account, we constantly ask each other, "What's working today, and what's not?" Then we try to the very best of our ability "to do more of that which is working and less of that which is not."


We've no set rule on how much more or how much less we are to do, we know only that we are to do "some" more of the former and "some" less of the latter. If our long positions are up, we look at which of those long positions is doing us the most good and we do more of that. If short positions are also up, we cut back on that which is doing us the most ill. Our process is simple.

<As always if anything I copy steps on toes or copywrights etc. let me know and I'll remove it>

Here are a few notes I've copied from Phil's Stock World-Phil Davis:
Phil 11/8/10 <pessimistic as he's been the last few weeks>

Yes, but until we really break over, this is as likely to be a top as anything else. Invest when you are sure, not when you just don’t want to miss out. If the dollar breaks 76, then we’re sure stocks will go up until it recovers. That’s easy enough to wait for isn’t it? If copper breaks $4 or oil breaks $77.50 or gold $1,400, then we have good signs that money is continuing to pour in and we can makes some bullish bets to cover the moves up but if you know that one bad article in the WSJ can tank this market – they why roll those dice on trades you don’t believe in?


If you play the market ALL the time bullishly, the only thing you guarantee is that you will get burned one day. Having an itchy sell trigger-finger is not a negative thing because, if you make 10% a year and get back to cash, you can retire very wealthy, even with inflation.


Short plays in general are dangerous until we see inflation break down and shorting commodities are the most dangerous. We were looking at shorts on valuation but now you have to give all those stocks another 10% at least to the upside to account for QE2. I guess this would be a good time to mention my preference to cash over endless playing in an uncertain market.


ABX is better than TBT at the moment for an inflation hedge as the Fed is not directly spending $600Bn to keep ABX down (quite the opposite).
 
Likes: JRP2891
Oct 23, 2009
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#11
Choppy markets are bad for trend followers such as myself. The Dow moved under its 21 day moving average on Friday. I've moved bearish too, giving up and loosening many positions. At the moment I'm 38 percent invested.

Today the Dow moves up, at the moment 70pts, .63%. The Dow is a crappy nonsensical index, easily manipulated and shallow with just 30 blue chips stocks. I should but switch to another, but I've used the Dow for so long it become natural to me. In such fondness extinctions lie.

Range bound chop can be good for scalping and covered calls. There is the G20 in the air, there discussions will rock the market..or not. For now I'm comfortable backing up, taking a seat further away from the action.

End of Day,

Allowed myself to get sold out of most of my International funds & trimmed a few other holdings. End of day I was up .22% vs. the Dow's .07%. I took my 'salary', drawing down the account 1.4%, a little more then usual, but holiday season & bills are upon us.

The .22% is an 'honest' .22% (not that many people brag about so small a gain) based on the total portfolio including the cash which at the moment makes up most of it.
 
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Oct 23, 2009
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10:26 and the Dow is down 1.53% dropping 170 points. Normally I'd be son of a bitch and other such sentiments, but my 'system' had gotten me mostly out of the market. Its also had me join up with a few Bear ETF's. I've had some QID's the -2XQQQ's for a week. Today as the market dropped sold some remaining positions as they dropped below the 21 day exponential moving average(most of these were partial positions since I'd been selling as they dropped below 7 simple ma.)

The 3 Bear ETF's I've bought were EDZ (-3X Energy), BGZ(-3X Blue Cap) & FAZ (-3X Finance), I've taken a half share in each. I wish I'd been following them sooner so I could have lept on a few days ago as they peeked there heads above the 21 day ma. Then I'd be sitting pretty indeed.

Amazing to watch F)ord which bucked the markets initial 70 pt drop and was up 20 cents. It ended up mauled like the rest. I sold a few shares and got more shorts on what I do own.

Conventional wisdom says the market goes down faster and harder then it goes up. That might mean a massacre in the coming week. If so I'm relatively well positioned with my new positions.



end of day: I'm down .15%, Dow down 178 or 1.59% down to 11023. My 4 Bears were up $2,275 for the day. I lost money cleaning out MOO & DBA, and a bit to drop out of others. My Ford dropped in value $1278. My house cleaning earned a realized P&L of $6,142. Unrealized drops to 11,295.

If tomorrow/rest of week continues to drop I'll be in good shape. Otherwise I'll just be a guy who tries to guess the market. I'd prefer to think I'm surfing it, letting it tell me where its going.

My purchase of 3x Bears may be overdoing it. Over reaching, still they're only making up 21% of my portfolio, and thats among 4 etf's. Something to watch and learn from. I'd be in much better shape if I'd been watching them earlier and started accumulating as they moved above there averages. future will tell

One thing is for sure, its better to get the hell out of the market while its falling and prepare to re-enter as it goes back up, then to sit and hope. Or is it? Chance and circumstance make fools of us all.
 
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Oct 23, 2009
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#13
Wednesday, the market was remarkably flat. from up 10 (most of the day) or so points to down 10. Its ended down 13, Dow @ 11009.80. Losing .13%, I'm flat, at 3:06 it says I'm up $50, a the close it was down $69. So I'll call it 0.

No thanks to my 4 bears. Qid down 5 cents. EBZ down .35 (-1.39), BGZ down 4 cents (-.36%), only FAZ was up .21 (+1.74). Another nice day for F(ord) up .18 or 1.08% which kept me neutral.

I went against 'the plan' and bought 300 OKS- a high dividend yield nat. gas & pipeline company. Natural gas was up sharply +4%(over $4.00?) and I thought I'd see it get out of negative territory. Nope, Its ended .45 lower then I paid for it. Perhaps I should stick to the plan.

I want to hold the 4 bears loosely, A the moment all 4 are in the green. I'd be willing to add to them if the market starts dropping or sell them out as they move through 7 day simple m.a.'s.
 
Oct 23, 2009
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#14
Jeez, 2 years + since I last posted. That OKS has been very good to me. The high dividend has gone from 6.5 to 4%, a good thing! The stock has almost doubled in the 2 years from 31 to 57. Its something I can hold and reinvest the dividends and in 2 more years I'll have somethings that's paying me 10% a year in dividends as per my initial investment.

I'm beginning to see That as the goal. Stop the day to day worry and concentrate on how to invest in a way whereas in 7 or 8 years you'll be earning 10% on your original money. The key ofcourse is dividend reinvestment. I've been following some of Kurtis Hemmerlings thoughts, particularly articles: A Do-It-Yourself System For Dividend Investors, Which Dividend Policy Compounds The Fastest? and Tactics To Hyper-Compound Dividend And Income Streams. You can follow him on Finding Alpha.

I like to collect and collate articles into a long 30 or 40 page collections. I've found Hemmerling to be a rare bird amongst dividend writers, an investigator willing to do rigorous back testing.

My inactive, buy and hold portfolios did pretty well this year. Which is good because my using my brain, intelligent strategies have done worse! Son of a bitch. For me this was a good year for dumb money. It will not always be thus, but I was afraid when I should have bold and ... I surfed badly, still up, not a bad year, but only because I had so much dumb money.

This year I've got to stay closer to my portfolios strategy. I also want to stress dividend payers. Last year I created a small set and forget dividend portfolio. Its done pretty well, more importantly the 3 or 4% dividends are now paying 4 or 5%. This is very good. I'd love to have the ease of having a large portfolio earning a nice low taxed 10% on original investment in 7 or 8 years. Hemmerling has some enticing thoughts on the subject.

For example I've been investing in HYG the last 2 years. Its a Junk Bond fund, though I the names it holds Citi group, verizon, dont' seem too junky to me. It also seems well diversified. It's a $93ish stock paying 6.5% dividend paid out monthly. I've been writing covered calls against it and when it and when it gets low 86 through 91 I'll write naked puts against it. It's been giving me a nice return. Nothing like options that go up 10 to 50% a day, but making a nice steady .8 to 1.3% on it, though there have been months I've bought it high, its gone low and I have to 'settle' with .55% not so bad since that is a monthly percentage and eventually it pops up enough to make a covered call at my original price. It makes for a nice easy profit system.

I'm increasingly seeing volatility as my enemy. I'm looking to take things easy, have good investments that earn there keep. Still I've owned Google and Apple the last 2 years. For the most part they've been good. I've been writing Out of The Money calls against them earning a nice percentage, but they end up getting called away once too often, or dropping too far down to get coverage at my original price. Its a nice system, but I don't like the volatility.

I've get my act together, my strategies and attendant portfolio percentages rewritten. Finalize the forms that make up my Trading Journal. Thats about it. Oh, and I should write here more often. I often don't know what I really think, until I put it down on paper (or the screen).