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Jeff Pierce
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I’m a swing trader of momentum stocks with a holding period of anywhere from a few hours to a few months. I run a number of screens to locate the strongest/weakest stocks out there, using technical analysis to determine my entries and exits. Trying to calculate the intrinsic value of stocks in... More
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All About Trends
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  • Inverse ETF Analysis 0 comments
    Jan 26, 2012 1:51 PM | about stocks: DXD, SDS
    The following is a brief excerpt from the weekend's premium newsletter from All About Trends, who teach traders how to achieve consistent gains through stock selection and daily trading education. When you become a premium member for $15/month (50% the regular price) you can expect to receive daily trade ideas and market analysis, along with a concise trading plan for each trade.

    DXD -- Inverse of Dow Industrials Times Two

    (We are now LONG 300 shares of this at 14.69 as of 1-10-12)

    1-22 We have no problem come Monday taking some more of this issue for a trade up here. We'll keep our current position for more of being an investor and that denotes longer term.

    1-22 See the blue 3? If this is going to stage a 4th wave higher (to 50 day perhaps?) then it could run to say 15 or 15.50 ish. From 14 that's a point to a point and a half. That means we have to take enough size to make it worth our while. Same goes for SDS

    SDS - This is the INVERSE of the S&P 500 Index TIMES TWO .

    (We are now LONG 300 shares of this at 18.25 as of 1-10-12)

    1-22 We have no problem come Monday taking some more of this issue for a trade up here. Heck a move in the index to the green uptrend line shown in its daily chart is good for a decent trade and all for the cause. We'll keep our current position for more of being an investor and that denotes longer term.

    WHAT IF

    1-10 (Updated risk numbers) So WHAT IF the S&P 500 goes to 1320 and lets also say we are long SDS (Inverse Of S&P Times 2) what would the impact to that position be?

    Well first off its a 2.3% move higher therefore the SDS position would go down twice that or 4.6% lower from here.

    Now let's say the position makes up 6% of your overall portfolio. Now what would the impact be?

    Well using a 100,000 portfolio as an example a 6% position is $6000, a 10% position is $10,000. Being down 4.6% on a 6% position is $276.00 on its own.

    Impact to the whole portfolio at that point is? 3/10th of one lousy percent! Surely you can handle that kind of risk right?

    On a 10% $10,000 position being down 4.6% is $460.00 Impact to the whole portfolio at that point is? 4/10ths of one percent!

    Stocks: DXD, SDS
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