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Michael Kudrna
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"The market can remain irrational longer than you can remain solvent.” John Maynard Keynes In an industry which caters to the greedy and already wealthy, it has become increasingly complex for the individual investor to find a path to success. “Buy and hold” is an inadequate investing... More
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  • Trading Lesson: Buy Winners, Not Losers 0 comments
    Sep 6, 2011 3:49 PM | about stocks: SPY, IWM, SDS, TWM

    Remember this basic strategy to save yourself from racking up big losses or holding lots of red and sweating it.  We have multiple discussions in the live chat throughout the day.  This point keeps coming up which is my ideal strategy yet most fail to understand it.  Try to rid yourself of wall streets bad habit pressed upon the minds of individual investors through major media.  Instead of buying when stocks are falling, constantly averaging down as if you have unlimited capital, buy on the way up. Buy winners, not losers!  That reduces risk because they are gaining momentum to the upside rather than trying to call a bottom which rarely works.

    I'm mostly cash right now because we have mostly losers and few consistent winners.  My problem is I tend to force trades when I'm bored or have limited exposure in the markets.  This is not a good trait to have, but because I'm aware of it, I have a better chance of remedying it.  Be aware of your own trading problems and you can remedy them as well. Right now, a big problem is the bad habit wall street has pressed upon the minds of individual investors.  The media continually talks about this like you must buy when stocks lose else you'll miss big gains.  That is completely illogical yet most don't realize it because so many preach it.  Take a step back and realize that 99% of the time, a bottom call is not correct.  If we actually kept the statistics of bottom callers, I'd imagine they would be terrible.  Nobody keeps track of them though, we only keep track of the one amazing call someone luckily made once in their lifetime.  That one call makes them forever considered an "oracle" on major media.  If you listen to them and constantly buy in a bad market trying to average down, you will not be pleased with the results the majority of time time.  That strategy means you will likely have to make up significant losses just to be profitable again.  My ideal strategy has me near my portfolio highs so that I can quickly make profits in the next bull market.

    The lesson is hold high levels of cash in uncertainty and wait until the market proves itself to aggressively buy longs.

    As always, do your own homework to see if you agree.  Good luck out there.


    No positions mentioned


    Stocks: SPY, IWM, SDS, TWM
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  • Will be adding back to $SDS (short spy) sooner than later after peeling off some on the recent move about 2 weeks ago
    6 days ago
  • Trimmed 1/3 of $SDS short and will reload if possible. Still holding a very large position to the downside, but have to expect bounces
    Sep 9, 2016
  • Closed out recent increment in $SDS from 16.41 to $16.61 to bring down cost avg of previous purchases in SDS http://seekingalpha.com/s/1jn9ww
    Aug 26, 2016
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