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Ocean Man

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  • Position Sizing And Averaging Down [View instapost]
    Although hedging is a topic for another day, if you follow my Stocktalks you know that I was net short coming into last week. This means that my bet against the S&P (using SPXU) outweighed all of my longs put together.

    That means that more than 50% of my holdings went up 3.8% with that S&P drop, while a large chunk of my longs only fell 0.7%. I also had two separate scalps on UVXY for 10% and 15%. In total, it was a very good week while many in the market were suffering large losses.
    Apr 13 03:40 PM | Likes Like |Link to Comment
  • Position Sizing And Averaging Down [View instapost]
    Since the day I wrote this blog, the S&P has dropped 3.8%.

    The 4 stocks I suggested having large positions in have gone:

    APU +1.2%
    AVB +0.2%
    KMI -2.0%
    BRK.B -2.1%
    Average: -0.7%

    This is the strategy working.
    Apr 13 02:38 PM | 1 Like Like |Link to Comment
  • Position Sizing And Averaging Down [View instapost]
    Re stops: as detailed above, stops are a component of the TA religion. You have to decide if you want to subscribe to the TA or FA style. I'm not saying the TA style can't be successful, it's just not what I use. In the FA method, you don't sell in reaction to price movement, you sell when news changes your thesis.

    Re calm underwater: emotion is the enemy of a successful trader. You need to do whatever it takes to eliminate it in your daily views of market action. If you can't, then this style is not for you. You can't get quick jumps in all of your picks, it just doesn't work that way. You have to go into it thinking that some will take a long time.
    Apr 13 11:59 AM | 3 Likes Like |Link to Comment
  • Position Sizing And Averaging Down [View instapost]
    Well, first off, I make a lot of picks, and not all of them end up winners. I have a very good percentage of picks that are winners, but it's not 100%. Among the winners, some take longer than others to show a gain, and some go down first. I'm sure you've seen some of my posts say "for a x% gain in 6 months" or "9 months". What's important about these two, is that the thesis is still intact; FEYE should be higher, and BBW should be lower.

    I'll close this answer with a story. Back in 2012, CLCT had fallen from over $16 to $12 (look at a 2-year chart). I liked this stock and thought that 25% pullback was a good point to buy. It proceeded to drop another 25% to $9, and stayed there for a couple of months. I of course averaged down, even announcing that it had become a large position. A number of people on Stocktalks let me hear about it every day, saying Ocean Man had lost his mind, should've used a stop, was going to lose his stack. But my thesis was intact, and I never panicked. Look at my picture. Have you ever seen anyone look so calm and collected underwater?

    The stock proceeded to gain 150% including dividends over the next 13 months. I haven't heard too many people question my methods since. But sometimes you have to wait.
    Apr 11 09:34 PM | 7 Likes Like |Link to Comment
  • Marijuana, Merger Premiums & The Missing Ashraf Eassa [View instapost]
    Motley Fool? Aw, man. I thought he was joining Motley Crue.
    Apr 11 04:24 PM | 8 Likes Like |Link to Comment
  • Position Sizing And Averaging Down [View instapost]
    If you were really bullish about a stock, maybe, but usually I look at it this way - being ahead on a half position is not a bad problem to have. And there's always the next dip.
    Apr 10 08:15 AM | Likes Like |Link to Comment
  • The Adamis Family [View instapost]
    Is that Guy Adami's family?
    Apr 9 04:44 PM | Likes Like |Link to Comment
  • Capitulation after a brief, bad run? [View news story]
    That was funny. Kudos SA. Exited in yen terms.
    Apr 8 08:01 AM | 9 Likes Like |Link to Comment
  • Position Sizing And Averaging Down [View instapost]
    When to sell involves a lot of considerations, but here are my main ones:

    Has the stock that I bought below what I thought was its fair price returned to its fair price? Trade over, thesis gone, wait for the next dip.

    Has the stock jumped a little too far too fast / gotten ahead of itself? I sometimes think in terms of annualized gains, and take half or 3/4 of a return to fair price if it happens quickly.

    Has my bullish thesis deteriorated at all?

    Do I have a better stock available for the money in this position?

    Am I happy with my gain? My desire to not lose back my gain may outweigh my desire to get the last little bit.

    And then I also weigh in my macro views. If I think the market is getting a little toppy, or looks to pull back, I will reduce my longs even if it's not the perfect sell point on the individual companies, just looking to reduce exposure.
    Apr 5 11:50 AM | 4 Likes Like |Link to Comment
  • Position Sizing And Averaging Down [View instapost]
    As far as a screening process, I just read the news every day, and based on news and earnings reports, I put stocks on lists of like, don't like, and neutral. When the ones I like dip, or when the market dips, I buy the ones I like. That's oversimplifying, but that's the general idea.
    Apr 5 10:36 AM | 2 Likes Like |Link to Comment
  • Position Sizing And Averaging Down [View instapost]
    For the question about averaging up.... There are two main schools of thought in trading - Technical Analysis and Fundamental Analysis, and they are not friends.

    TA looks for support levels and chart patterns suggesting a bounce. You're attempting to pick the bottom. If the stock goes down, your thesis was wrong, and you should get out. Many TA adherents worship at the altar of Jesse Livermore, and believe if you were right for a day or two, you are going to stay right for another day or two, and you should add to your winner. That's not what I do. I've never been impressed by the success rates or rationale behind this school of thought.

    FA assesses what a stock should be worth based on discounted future earnings / cash flows, growth, buyout potential, dividends, etc. This is what I do. I believe in Benjamin Graham's statement that the market is just wrong sometimes. This provides prices which are both too high and too low at various points in time. I try to take advantage of these. Therefore, if I think a stock is a "good deal" at today's price, I will think it's an even better deal at a lower price.

    So you can see why there's debate around averaging down. Traders fall into two different religions with completely opposite views on the subject.
    Apr 5 10:28 AM | 4 Likes Like |Link to Comment
  • Position Sizing And Averaging Down [View instapost]
    For the question about me going in and out of the same names, yes, there are a number of stocks that I feel I know very well, and I have a price I think they're worth. I keep them on a watch list, and when they dip significantly below the price I think is fair, I buy them.
    Apr 5 10:13 AM | 2 Likes Like |Link to Comment
  • Position Sizing And Averaging Down [View instapost]
    Ok, for the question about how to bucket the stocks, there are many considerations, but here are the main two: past year's trading range and Beta.

    If Beta is low and the range is tight, then it is showing some safe characteristics. If Beta is high and the range is wide, it is showing some risky characteristics.

    APU - past year's trading range $41 to $50, high over low = 1.2, Beta = 0.3. Safe.

    BRK.B - past year's trading range $103 to $119 (when I bought it), high over low = 1.15, Beta = 0.3. Safe.

    TNXP - past year's trading range $0.36 to $21, high over low = 58, Beta = 3.4. Risky.
    Apr 5 10:09 AM | 1 Like Like |Link to Comment
  • Position Sizing And Averaging Down [View instapost]
    A couple of these questions require long answers which I will try to get to this weekend, but thanks everyone for the great questions and kind comments.
    Apr 4 01:54 PM | 4 Likes Like |Link to Comment
  • What Seeking Alpha Is Doing To Prevent Paid Stock Promotion [View article]
    I realize that this article is about combating paid stock promotion, but in the greater battle against SA being used for pure stock manipulation, I would suggest you consider rules around article publication in the last few days prior to monthly option expiration. Those attempting to maximize gains by manipulating stocks like to publish articles shortly after loading up on options when they are cheapest, just before expiration.
    Mar 27 07:10 PM | 14 Likes Like |Link to Comment