It could be that he's right on all of it and I'm wrong
It's never wrong to sell at a profit:
The reason I disagree with this, is you could end up selling all your winners early, and then you won't make enough profit to outweigh your losing trades. You need to WIN when you win, because there's a good chance you will lose when you lose. Of course, don't hole
Always hedge your positions:
I think what he means is, have some longs and some shorts, and that applies even when you think the market is going one way or the other. Now, it is possible that some stocks will go one way when the overall market goes the opposite way, and you can still make money on everything. I think that as long as you are not all in, you are hedged. It doesn't matter if you make a bad trade and a good trade on the same day, or if you make them on different days. You are equally hedged. Take this week, The timing array says stocks should hit a low this week, so why be long anything?
Take a small initial position and add to it if it goes your way:
This might work out in reality, but on paper the stock could go against you after the second trade as easily as it could the first trade. Extra work, extra commission cost, extra reporting issues. I just don't see the point.
For the hedging part, Mannarino put out a video on his Evolution channel on September 19, 2016.
ReplyDeletehttps://www.youtube.com/watch?v=iBZxHzonjQk
He says to use a 10% rule when investing as it works like an insurance policy if the market moves the opposite way. It's an interesting strategy along with using other strategies like straddles and strangles to protect investments. I am still so new to all of this so I am trying to find what works best for myself as I believe most of us here.
Then you will lose 10% of every investment, and turn a lot of would be winners into losers.
DeleteIt's okay Joe, I understand about the comment deletion.
DeleteAs far as what I written earlier, I will try my best to write what I had.
From what I understand, you would lose the 10% but would make up the difference from the opposite side moving in the direction that you wanted it too. So instead of 100% profit it becomes 90% profit. The hedge is their to protect from the market moving away from where you think it is heading. I do agree with Veidar that it eats up profit. But as a insurance policy it is an interesting strategy to think about since the market can turn on a dime
On the first point, I think it's good to take a profit after a parabolic move (like after Brexit and some FOMC meetings), which is quite rare. In other cases to use a dynamic stop loss or move, and even tighten, the regular stop loss as it moves. But it could always gap down a lot so it might be good to take profits on half and let the rest ride.
ReplyDeleteOn the second point I kind of agree with Mannarino, but the problem is that the hedging eats up a lot of the profit.
And I totally agree with you on the third point!