In trading stocks, some people really invest long-term, where they buy and hold, some hold them for a few weeks to a few months, and others constantly trade everyday. I see the advantage of day trading to get money in your pocket quickly but you have to be nimble. Always on your toes, watching the market well throughout the trading day. Or use some tools to pull the triggers at the right time for you. Since I am not a nimble trader and I do have a day job to attend to, day trading is hard, so I go swing trading.
In a down market, and with limited funds to run a margin account to play on the down side, the ways to earn by swing trading is either go with the shorter up trends that happen within a day or several days, or to go long with contra ETFs. Last week I decided to look at stocks that have a good track record for the past 6 months. A stock that is not that volatile with signs of steady growth. I chose two, SAFM and
The day is starting to roll out, first trading day of the week since Monday, February 16 was President’s day and the market was closed. Coming from a loss of $200+ in an $8,000 portfolio wasn’t good for me. I know this is a small amount compared to people who have a quarter million dollar stock portfolios, but since I am still learning the same lessons. a $200 loss in an $8,000 portfolio is like a $2,000 loss in an $80,000 portfolio or even a $20,000 in an $800,000 portfolio. If I can’t make it big in a smaller scale, I cannot do the same in a larger scale. Anyway all I am saying is $200 is still a big amount for me to just lose.
Prepared to just go sell at a market order, accepting defeat and further minimizing losses as the market opened, a few minutes into the trading day, I modified my trade to a trailing stop just to gain whatever small gains I can get. The market started high right out of the gate then started to dip back, went sideways a bit before rallying up again by 12:00 pm ET. Since the stock I got stuck with last week due to a purchase of a contra ETF with unsettled funds took a real bad hit for me giving the $200 loss, at least turned into a $150 loss after doing the trailing stop. I started with a 4% trailing stop, then as the market turned and rose again, I adjusted the order to a 1% trailing stop to get out of the trade saving what I gained for the day.
I also added a limit order to buy long for TSN, but I missed the bus early in the market open and one thing I learned is to not chase the trade. My limit didn’t make it and that was it for the day. I learned my lesson already from last week that I do not need to try to find a trade at the last minute just because I am trading nothing. I don’t need to be in a hurry.
My new strategy for now is:
If I do not see a confirmed up trend in the market, I won’t buy long yet. If I see a downtrend and has the time to monitor it well, i will go long on multiplier contra ETFs and go and out for a quick win. If I do not have the time, I will not go in the market and remain in a cash position.
Then in the meantime, I will start
In a volatile market, it is a trader’s market and not an investor’s market. If you hold positions too long, you lose a lot of your portfolio amount and you never know when the rebound comes back. There will be a few days of up trends thinking this is already the turn around point, but it isn’t. And if you decide to just hold your stocks and wait for the turn around which will eventually happen, you may have lost too much already that you will just be winning back what you lost and not earn more. But in a trader’s mentality, you have to be nimble and on your toes to make trades when they should happen.
Mistake/Lesson #1: Invest the time to plan your trades
I do have a watchlist of stocks. But even that watchlist is not planned well. I should plan based on different scenarios of market movements, so I can react properly as the stocks move. If the direction does not go my way, what is my secondary plan? This past week I didn’t have back up plans when things go wrong. I just assumed things would go my way as how I wanted them.
As I’ve mentioned in my last blog post, I starting stock trading again and this time as I trade and learn, I will blog about them. The decisions I made and what I learned in the trades. Hopefully I get other experienced stock traders to share their thoughts and help guide novices like me.
This week, I was coming out from a loss of about $100 and was waiting for my funds to get settled where that date was on Wednesday, February 10, 2016. We are currently in a bearish market, the trend has been going down for the past 3 months.
But that does not mean money cannot be made, but it is often not advised to buy stocks this time because as the trend goes down, the more you lose. By the time it goes back up, you are just making up with what you lost. Some people may advise it is a good time to look for bargains of high value companies that are nearly assured to improved when the market goes on a rebound.
How to make money in a down market?
With my few years of experience in trading, the ways I am aware of making money in a down market. I have 6 strategies here to choose from, but based on my knowledge, amount of time to invest, amount of funds kind of dictate what strategy I can do.
Started in my Corporate Finance Class
I am not a professional stock trader. I just started getting into the stock market when I took my MBA classes at the University of Redlands about 4 years ago where one of my subjects, Corporate Finance, our professor divided us into groups where each group were to paper trade stocks starting with an amount of $100,000 and all groups that get to a $1,000,000 investment portfolio were given an extra 0.5 to our final grade.
Early Successes – I was Just Lucky
Our group did reach the $1M mark and so did many of my classmate. It appeared easy then, so I thought, so that was the day I started signed up on Scottrade and started trading with an amount of $1,000. After a week, the portfolio value was $1,100. Shared the news with my wife who agreed I invest in more and added more funds to fill in a total of $3,000. Consistently enough, after a week, I made $3,300 as my total portfolio value in a week.
This gave me a false sense of how easy the stock market is, until it started going downhill. Most of my trades that did well were mostly based on recommendations from