The payoff for investing in a sure thing is lower than usual these days—a 90-day T-bill only pays 1.8%. But the quest for better returns comes with greater uncertainty. That’s why investors have developed so many tools to take the edge off the potential surprises stocks can spring on them… from fundamentals like P/E ratios to technicals like trend lines. Not surprisingly, the academics in finance have worked on the problem, too. And boy do they have a deal for you. This one…
Yesterday I was looking at a spreadsheet of Rising Tide stocks. Things are behaving well overall. Some up, some down in the past couple of weeks. The ratio was good— five risers for each faller, and none moving hard the wrong way. What’s more, the stocks that were falling were concentrated. Two of the retreaters were financial stocks –the only financial stocks in the portfolio. This is the other side of momentum. Smart investors often look around to see what…
And now I must confess, I could use some rest I can’t run at this pace very long Yes it’s quite insane, I think it hurts my brain But it cleans me out and then I can go on Jimmy Buffett, Trying to Reason With Hurricane Season Last week I wrote an article comparing trading and poker. Probability is instrumental to success in both of these endeavors. Another thing that seems to be imperative to both is being mentally fresh. When you are looking at charts or doing your risk/reward…
So far, in our hunt for volatility we’ve gone where few true-blue investors dare tread. We’ve looked at volatility and exposed its threat to trailing stops. We’ve looked at how you can preview how much a stock is likely to go the wrong way before you should be worried by using ATR —average true range. Now we’re going to talk percentages. Instead of asking, “does this stock swing by a dollar a day?”—which is a big move on a $5 stock and…
Over the last few weeks, I have been in a position where probability went against me. Once was in a friendly neighborhood poker game and the other was in trading. In both instances, the odds were defied and I lost money. In the poker game, we were playing Texas Hold ‘Em and I had a pocket pair of aces. My buddy went all in (meaning he bet everything he had) before the flop (the first three community cards). I immediately called of course, knowing that he…
It’s volatility again, part two of a subject you probably didn’t realize you’d be dying to know so much about. Last week, we took a look at how you can accidentally hurt yourself when you mismatch a high-volatility stock with a stop loss. This week, we’ll discuss an easy way to keep you out of that kind of trouble. Very volatile stocks aren’t just likely to trip your stop losses—if you even use stop losses—they also tend to look like they’re…
Last month we decoded chart trends. This month we will tackle volatility, which is probably even easier and much more misunderstood. People who trade options study volatility closely. They hunt it out or avoid it. They massage it and time it. They know it can work for them, or against them, and in either case it strongly affects their price. In contrast to the option trader, most of us stock investors give volatility very little thought, if any. If that’s you, you can continue…
What do the Iraq War and 90 percent of investor’s have in common? There’s simply no exit strategy in mind. So if an exit strategy is so important, why don’t most investors plan for one? The first reason is because they simply don’t know that it’s part of investing successfully. Learning about stop-losses and risk management simply isn’t as sexy as learning about how to make triple-digit gains. So the subject is often avoided. Second, it’s a matter of…
When your whole world is falling apart, there are always government bonds. Not that the world is falling apart. But neither does it seem to be holding together very well. Today it’s tattered. Tomorrow maybe it falls apart. We really haven’t seen anything yet. Stocks are 10-15 percent off their highs. That’s all. And many sectors have been holding up quite well, like energy, agriculture, rails, and commodities.But moving forward, we can’t have everything go our way. For…
Here’s something you might not know about me.From third grade to eleventh grade, I went to a performing arts school. I didn’t go for acting. And no I don’t dance. I went there to play the violin.Now, playing the violin isn’t nearly as easy as picking up a guitar and strumming out a few chords. You have to know how to hold the violin properly, how to hold the bow properly (that’s the piece of wood with horse hair that glides across the violin strings), you have to…
