This is one tough market to trade. Especially since my schedule is keeping me away from the office and I can’t follow the market during the day.
Back when there was a clear uptrend and I was in the office all the time, I could get up early, check out some market data and trade all day and make money. I was a genius! That was how it felt anyway. In reality I was just lucky to have the opportunity to be trading in a rising market. This is true of so many who try to sell you on their “genius”.
Everyone is a genius in a rising market. Just listen to them, they will tell you about all their winning trades.
These days when the market is not clearly trending up, it is harder to find a genius. That is why this market is the most valuable to learn from. It is hard to deal with…
So before I have to leave the office today, I am looking at the market and my portfolio. Every day you have to decide to handle your positions. Leave them alone, sell, buy, place threshold orders (stops, limits). So I am looking at my portfolio and considering what to do for the day. Because the world may change today and if it does, the market will change. My portfolio has to be ready for change. I have to be ready for change…
Should I put in stop loss orders? Or should I “let it ride” if the market goes down, it will come back right? Maybe not…
So lets talk about some of my stocks. I bought in when the market was trending down and then stopped going down and leveled off. I was mostly in cash and I wanted to bet on things starting to improve. I was right, for a while. My DRYS was up almost 20% for a while. My DRYS was a play on a Euro solution that came and went. The market changed but my portfolio didn’t… My HERO is up 10% percent today but that is just a number until I sell and lock in gains. I don’t plan to sell just yet…
Today DRYS is up only 6% for me. Have to watch that. Always want to limit losses…
My MGM and IRBT are both down about 10%. Did I mention it is hard to be a genius these days?
Some theories say to sell and limit your losses in the single digits. Others say that you ride it out and it will eventually come back. Both can work if you apply them well and at the right time. Warren Buffett is often credited with being a genius. I don’t think he is a genius. I think he is consistent. Disciplined and consistent…
Trying to stick to my own discipline, I have been using a range lately. If I an down over 10% I start to watch that stock for a sale. In the 15% to 20% range. I watch closer. Over 20% the stock is on my sell list. That way I limit losses. The problem is that I have a lot of work to get back to even. If I lose 20%, I have to make 25% return just to get back to even money!
So these days, in this market, I am looking to limit losses long before 20%. I am thinking more defensively. So I want to limit losses before I get very far into double digits. So I am watching the MGM and IRBT and may sell them soon or put in a “stop loss” order to set a “loss floor” under them.
But it isn’t that easy…
If the market goes down, I want out now. If the market is bouncing along the bottom about to rally, I want to hold. What should I do?
Look at the data. Think. What is the stock history indicating? What is the market data showing? What is the economy telling us? What can go wrong? What are we missing?
So many questions, so few answers… That is the market we have and the life we live. That is where I am at today… So what to do? Not sure. I have to look at the data a little more and make a decision for the day. This day and every day.
Better get to that. For now, I am betting I will let things ride. Based on my read of the economy, the market, these stocks and my guess about what comes next. Hope I get it right and make a few bucks. If I don’t I will learn some valuable lessons but my portfolio is down for the year. I can’t afford too many more lessons…