I am certain that this little read will see its share of criticism but I think the far reaching ideas deserve attention as well.
I have been using a very small amount of my portfolio, about 10 percent of total value, for quick play. A quick play, not a new concept by the way, is where an investor finds a mistake in the market and quickly capitalizes on it before the mistake is fully noticed. Once the mistake is generally noticed, the price corrects itself for a quick profit.
During the nuclear disaster occured in Japan, shares of Nike went down far too much. Nothing significant changed in debt, real assets, inventory, production ability, etc. yet the market over reactively responded. I bought into Nike and sold it within 15 days for a 6 percent profit while sacrificing pennies of it in trading fees. Further, I transacted through my Roth IRA to minimize taxation. I walked away with a few hunderd dollars and a nice smile on my face for 7 minutes of work and 13 days of patience.
To be fair, I was moderately versed on Nike prior to the disaster which gave me a leg up. So to future quick play opportunists, know the company that you are about to pull the trigger on because you will have to live with it should you fail.
17 July 2012, the mattress producers all felt the pain of one poor earnings report. One amongst them, Select Comfort, certainly did not deserve the hit. By 18 July 2012, my purchase order was complete and my sell order was in queue. At the opening bell on 19 July 2012, I walked away with $538. Not bad for a 10 minute decision and an additional 2 minutes of work.
Quick play has also been proven to fail me from time to time. Lexmark is one such an example. Similar conditions as the other instruments existed and I pounced. Many months later, I flatly traded it away regretting all of the missed opportunities along the way.
Quick play requires a few things to work: 1. an intermediate knowledge base for trading, 2. an intermediate understanding of valuation, ratios, risk, etc., 3. an intermediate level of familiarity with the instrument and underlying company, 4. a tough stomach, 5. patience like an antiquities dealer willing to search through hundreds of worthless things to find the one jewel, and 6. some quick cash.
All and all, I have been able to offset some moderate losses using this method over the last year or so. Give it a shot, give it a while, and give it some feedback.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.