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Post by sd on Apr 7, 2020 17:48:52 GMT -5
Hi IRA,
Volatility allows wide Swings- If you did not sell on today's gap higher open, you may see a move back in your favor-
You could use today's High as a gauge for setting a stop-loss- Ideally, you are limiting your entry size to no more than 10% of your Account- or less-
Get your feet wet gradually- Long ago I had posted a position sizing strategy - designed to limit your exposure to a significant account loss- That really helped me to try different types of trading approaches and not blow my account up- Thanks to Bankedout and DG- years ago. Hard to limit yourself- but to survive the long term , it's the proper way to start- get 50 trades under your belt and adjust the ratio gradually as you learn to discern different markets- We are Not trending here- so the chop is wide- Best bets are to Trade With the Trend-and -if undecided- sit on your hands.
Nuts and Bolts- 10%- 2% ratio- No position should be greater than 10%, and the stop should not exceed 2% of your account value- You can vary these settings-
perhaps even allowing the stop to be 3-4% of the account value- but it is more important to survive the Learning Curve of trading using actual $$$$.
The value in applying a systematic approach in limiting your exposure is that there will be days- like today- that having an overweight short position puts one in the House of Pain- and tends to cause stress- By limiting your exposure and position size, you will last for the long term- Many get too anxious to make $$$ , bet too large, and suffer large losses-
I personally doubt that this rally will hold - and so Sold 2/3 at today's open . But, these wide gap moves also point out How difficult it is to hold a position that is counter to the move. Today's up move decisively failed- The High of today should not be breached by your short position. (the Low of your short position )
I expect you will see things move in your favor Wed.
I appreciate your postings and the thinking/logic-that you share...
Good Luck!
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Post by sd on Apr 7, 2020 18:52:33 GMT -5
Hi RD,
Yeah, I made a couple of stupid (JETS) investments in the trading account when I heard the Fed would backstop everyone and the Government was going to pass out Lollipops to all in Need- Fortunately, it's a relatively small investment- less than 1.5 % Net-overall.
I thought Jets had been badly beaten already- but boy, was i wrong! I agree- I think this will be a game changer for our economy- and unfortunately- millions of people will be affected for the negative -I took positions in the Trading account thinking the lows had been made- Certainly I did not apply stops as I was trying to shift into -hands-off -investor mode-
I don't know where we go from here- but the potential to see a far greater decline is certainly there-Today, the fizzled out Rally attempt sees the Spy -22% at the close-
I am personally reducing my market exposure and increasing my cash position- I think I am content to limit my exposure until a confirmed market trend is established- I am unable to purchase short Etfs within my Roth and IRA accounts- but I am also too busy with the day job to try to time that closely. Protecting decades of retirement assets from a 25% decline is a Win for me. Confirms the value of applying stop-losses initially as the uptrend broke down-
While the SPY is -22% off the highs- many 401k holders will see a similar loss of value totally out of their control in mutual funds that do not allow stops- They simply ride the train down, and still pay the management fees.
I hope your Cousin manages to stay safe- It seems NY is lacking in providing proper PPE for their healthcare workers- They were overwhelmed with patients- Kudos to them that care for others in this battle!
Looking to the future- I agree that Robotics should be a solid investment- that includes auto-driving vehicles- One way to consider that as an investment may be best considered through a limited sector fund like what ARKK funds offer: they have focused sector funds- ARKQ- includes the robotics/automation- Also has other focused funds: ark-funds.com/
Unreal that some do not take this virus as serious- Spray bottle with at least a 5% Clorox solution - Your Mail- Groceries- soap and wazter of fruit and produce
Stay Safe-
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Post by sd on Apr 7, 2020 18:55:02 GMT -5
Lack of Time- Posting an e-mail to a Friend:
I actually bought some MSFT yesterday-
I hope you are correct on the peak of the Corona virus- but I think that may be optimistic- Perhaps NY thinks things look better- but over 700 people died there yesterday-
Other communities - New Orleans, Fla, Mich, Chicago also are facing a growing issue- .
Cases Here in NC seem to be increasing- but there are a lot of people following the stay-at -home request of the Governor- and a lot of businesses have shut down as well- so ideally the impact of the virus will diminish here by the end of April-
Yes- I think it is likely just a relief rally, and so I took the opportunity with yesterdays up 7% move to set limit orders to sell 2/3 of my positions- because I am doubtful that we realize the true impact of this on our economy and citizens- Tens of thousands of small jobs will disappear, unemployment will be much higher- and the potential for a possible likely return of the virus this fall/winter (assuming it disappears this summer) has not been taken into account. I also listen to the Fast Money group- and most are very cautious about this market- thinking we go lower yet. I think we have the makings of a Recession that will last for the remainder of this year-
I was fortunate having been stopped out early on- and into cash- I had got ambitious (Greedy) and bought around the -20% down and again at -30% - I had a large % of my retirement account back in. play- and I have now reassessed my desire to have that at RISK
The futures were all up higher this am- and all of my Limit orders filled at the higher open- I haven't reviewed the actual trades yet, but yesterday's move up had me up at a High in the Vanguard retirement accounts. . Today's gap higher open on most funds should have set me into a new net high value- Today's higher opening move failed to Hold and the markets all sold off - approx -2% below the open,.,
Dow gave up 900 pts,,,, Closing near yesterdays highs.. I may set stops on the remaining positions....undecided -
I don't know if we will see a deeper decline - but I felt I was overextended with that large a % of the account in play without stops- and a reevaluation of the potential for a recession seems likely.
I'm thankful we don't live in an apartment building or large city- We are taking limited precautions on the jobsite - "essential gov't project" - Hand sanitizer , clorox spray solution, etc.
Even when retrieving the Mail from the mailbox- I spray the envelopes with the clorox solution.
I'll check out your picks- "MSFT, GOOG, PFE, WBA, DOCU, MMM, AAPL, AMZN ..." WBA seems to be lagging -no rebound- that's suspicious.
I have a new chart list to update and post-just haven't gotten around to it yet-
I'll copy this and Post in DG's.
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Post by sd on Apr 8, 2020 4:00:31 GMT -5
STOP-LOSS STRATEGY WORKS
I sold 2/3 of 8 of my positions in the Vanguard retirement account-Tuesday at the opening rally - Orders put in after the Monday 7% + up move-
Goal was to reduce my exposure and capture some gains from purchases made on the way down-
The net result of this approach is a 1 year net return of + 13.8% -
I was about 75% back in at the time, and I feel that was too much exposure to the unknown economic tragedies we will hear about in the months ahead-
The equity curve - due to employing stop-losses- and buying the dip down slopes upward.
Reducing position size is a defensive reaction to my concerns that we are indeed going to find ourselves in a difficult time when we try to get back to normal-
I was going to try to adopt an investor approach, but I think I will continue to protect the present remaining gains with stops -
Will have to update the public chartlist-
i.imgur.com/e5EFYGV.png
Net gain for 2020 YTD in the Vanguard account is +4.9% at today's Close- That could easily be wiped out with a market pullback- due to my remaining positions still active-
I think I will revert to my past strategy and trail momentum stops on the present uphill market move- and will not be too anxious to jump back in with both feet- 4-8 note.
YTD equity curve-
Reflects the impact of getting stopped out in Jan, Feb and then purchasing on the decline, and seeing this higher market rally-
I will again be trailing stops- likely along the fast ema or one day lagging at the ema. Market rallying higher today- Equity curve since Jan 1 is a positive +5% gain.
If trailing stops get hit on lower market pullbacks, that net positive gain would likely be nil or close to net $0. assuming a -5% decline overnight in the positions compared to the stops.
i.imgur.com/WtBlOcd.png
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Post by sd on Apr 9, 2020 19:39:35 GMT -5
4-9-2020 Market started higher, but closed down from there -This rally may be able to extend itself further , but I'm taking positions off as we move higher, locking in some relatively small profits- and reducing my position size- I'm down to about a 25% position size with stops within 1-2% of today's lows. I didn't like the tepid close.
VFMV I sold and took a couple of hundred dollar loss-
I am no longer thinking as optimistically as I did when I started putting cash to work as the market seemed to go on sale- While this rally has allowed me to see a new high in my account, it is now about 5%-6% above where I came into 2020- The return on the $$$ I had invested during 2020 was closer to a net 8%, as i had kept a portion sitting in cash- And during this time, I had rolled an IRA into my self directed Vanguard account- .
I had considered allowing Vanguard to take management of some- but at the time the rollover completed, the decline was well underway, and the Vanguard rep essentially said they did not try to time when to put money into the market as it is a long term approach- That didn't seem prudent to me at the time to let them jump in what was the early decline.
I'm much more comfortable waiting to see how we may settle out in the months ahead- I believe that we will undergo a large period of transition due to changing procedures, lost employment, and lost business. I will consider myself lucky in riding this rally up and capturing gains- and will also consider being patient and viewing market declines for a future investment
opportunity- While still being among the fortunate and working full -time, I don't get much opportunity to get market information except the Fast Money, Cramer in the evening.
I did put up a new public chart-list but hadn't annotated the buys and sells yet-Thought I would have caught up on that... but life happens-
Also still holding a few stocks in the IB account.....sTARTED TO ANNOTATE THE CHARTS...i THINK i GOT SAVED BY SELLING INTO THE RALLY!
stockcharts.com/public/1675108
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ira85
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Post by ira85 on Apr 10, 2020 20:34:58 GMT -5
My first trade since taking over my Roth IRA was not much fun, but thankfully it was cheap. I was shorting the rally and was stunned by the strength of it. The rally seemed to be losing steam Tuesday, April 7. I fully expected to wake up and find it continuing to lose strength. I guess the bull rested over night. I sold Wednesday, April 8 for a small loss. The rally continued and ended the week with a big gain. There were several articles on Seeking Alpha about the surprising strenght of this rally. The market fell far and fast with the initial break down. Then it's had a couple of strong rallies. Now it seems quite a few of the authors on SA are expecting a resumption of the downside and a test of the low. I was expecting downside action when I took the short position, of course. Now I'm thinking surely the rally is just about done. I'll sit on my hands next week and see if there is a sustained move.
As luck would have it, my short position was just about 10% of my account. I'll keep under that number. I want to learn about managing my portfolio and hopefully I'll learn enough that I don't quickly lose it all. Thanks for the guidance SD!! -ira
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ira85
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Post by ira85 on Apr 10, 2020 23:02:36 GMT -5
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Post by sd on Apr 12, 2020 8:38:38 GMT -5
Happy Easter!-Ira, good that you sold- Controlling the potential for losses to rapidly exceed one's expectations is the essence of employing stop-losses when you put the trade on-
With the $VIX still at high levels, the swings of the market can be wide- and- that may also be something to consider in reducing the entry position size. Even if you have the trend direction initially correct, the volatility swings can act against you intraday- hitting your stop, and then continuing back in your direction.
In the 2 articles you linked, the 1st one: The Trade-Off Between Upside Participation And Downside Protection-
You can find the PDF in the 2nd article listed in this link-
www.google.com/search?q=s%26p+500+managed+risk+2.0+index&rlz=1C1SQJL_enUS886US886&oq=S+%26+P+500+managed+&aqs=chrome.1.69i57j0l7.10425j1j8&sourceid=chrome&ie=UTF-8
The PDF indicates that this strategy may be prudent to use for us retirees as a core holding in one's portfolio- It does not give the entire positive return of the S&P 500 , but similarly greatly reduces the downside risk % - Interestingly, it's long term performance may be net more stable yet outperforms the typical 60-40 stock/bond portfolio over the long term in terms of significantly lower drawdowns - see page 6 of the pdf.
SPXMR2- but I cannot draw up a chart of this particular index. on Morningstar, Vanguard or stockcharts- so it may be for institutional purchase only -
It appears this and similar other offerings have been on the market since Jan 2017, so the results shown are by doing a historical backtest- Not the actual performance.
"PERFORMANCE DISCLOSURE
The S&P 500 Managed Risk 2.0 Index, S&P 400 Managed Risk 2.0 Index, S&P 600 Managed Risk 2.0 Index, and S&P EPAC Ex. Korea
LargeMidCap Managed Risk 2.0 Index were launched January 23, 2017. The S&P EM 100 was launched August 27, 2018. The S&P EM 100
Managed Risk 2.0 Index was launched September 4, 2018. The S&P U.S. Treasury Bond Current 5-Year Index was launched September 13,
2013. The S&P U.S. Treasury Bill 0-3 Month Index was launched March 24, 2010. The S&P EPAC Ex-Korea LargeMidCap was launched
December 7, 2015. The S&P U.S. Aggregate Bond Index was launched July 15, 2014. The S&P Global Developed Sovereign Ex-U.S. Bond
Index was launched January 22, 2017. The S&P 500 Dynamic VEQTOR Index was launched November 18, 2009. The S&P 500 Low Volatility
Index was launched April 4, 2011. All information presented prior to an index’s Launch Date is hypothetical (back-tested), not actual
performance. The back-test calculations are based on the same methodology that was in effect on the index Launch Date. Complete index
methodology details are available at www.spdji.com.
S&P Dow Jones Indices defines various dates to assist our clients in providing transparency.
There are also other risk adjusted strategies -
us.spindices.com/indices/strategy/sp-500-low-volatility-index
us.spindices.com/indices/multi-asset/sp-500-dynamic-veqtor-index-total-return
I personally intentionally went in early in the decline in VFMV - Vanguard's version of low volatility - and it proved to be anything But!
i.imgur.com/rVccc9o.png
Lesson to be learned- Do Your Homework 1st !
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Post by sd on Apr 12, 2020 18:06:50 GMT -5
EASTER SUNDAY- 2020- Covid 19 reality- sinking in... some 450 cases confirmed in my County - many not being tested- so I would assume the actual count is likely much higher- perhaps 10x -
The county I work in has had a number of nursing/retirement facilities where dozens of patients have become infected already, some dying this week- and after what happened in Washington State- why were adequate precautions not taken for these exceptionally vulnerable people?
I think it's fair to assume this will continue to expand - The wife and I went to both Lowes and the local Ace hdwr this weekend-With masks and gloves and anti virus wipes. About 30% of the people were wearing masks. Social distancing was regulated at Lowes- but clearly a large part of the population is failing to wear masks or show much concern- This needs to change to limit the spread-
I was surprised this past week to go into the local Advance Auto parts and find they were selling a ZEP - anti-bacterial and virucidal cleaner in yellow gallon containers-
Even says on the label that it kills the Corona virus- That and a 5% clorox solution and you have a winning anti virucide solution. Needs to stay wet for 5-10 minutes to kill the virus though! One Humorous note- I bought 2 lottery tickets at a local neighborhood store Friday pm and sprayed them down- and Today found that they were totally bleached out- numbers not discernable LOL! Next time I may just use the Lysol wipes we have.
i.imgur.com/J4ZB7RI.jpg
We take steps to use a spray solution of at least 5% clorox- and I've become a real chronic virus phobic- I spray down the mail in the mail box, I recently sold some surplus FIG plants on craigs list - and wore all the gear and sprayed down the money handed to me and let it sit and dry for at least 24 hours- When I buy something at checkout- I do not take any change back-I try to keep enough small bills to make the tally close- and tell them to keep the change- Same with the plants we purchased this weekend from the greenhouse stand-
I didn't want to take any change back . period.
Enjoyed the Sat & Sunday in the garden with my wife! Face time with the Grand Children excited about the Easter Bunny! Playing in the raised bed planters we now use for our gardening vs in ground . Small scale vegetable garden with just the basics- and lots of peppers, tomatoes, cucumbers-squash, lettuce, kale etc... Just getting ready to plant- Love Spring! The elevated beds make for easy tending and eliminates worries about rabbits, moles, etc. The perimeter 6' fence keeps the deer out-
i.imgur.com/Jx2JfwZ.jpg
i.imgur.com/yR5yY6E.jpg
Doesn't look like much mid April- but we will enjoy the harvesting in the months ahead-
Thinking about the impact of this virus- and how millions of people will be severely affected- lives totally disrupted- For years to come-
My Heart wants to be optimistic- but I think the reality of the virus impact is only barely being considered in the job numbers, which eventually will be followed by defaults, in vehicle loans, mortgages, credit card defaults.... school, work at home- and jobs forever lost-
We only have to ask ourselves- How could we have fore seen this pandemic event- and will we be better prepared to adapt in the future? Well, no one really had a perspective on this entering into 2020- and the impact is only being widely realized in the past month-
i think the impact will last for many months as this progresses through our Country at different stages of infection- Washington State, NYC and Michigan will be followed by Texas, New orleans, and then smaller communities - If this Virus magically declines in the summer months- perhaps we return to a semblance of normalcy only to see flare-ups occurring this Fall as the Flu season develops- but perhaps this pandemic will galvanize the bio-medical community to make those advances to eradicate the virus, the Flu, and to stabilize our society going forward.
As i checked my Vanguard account this pm- I am holding the account at a new historical High- Somehow this is not the trading victory-Nor a personal strategy victory.
it is simply a stop-loss strategy that took advantage of market declines where others Sold and i purchased at the lower prices. The market is still Down -17% from the highs- and my expectation is that it likely goes lower from this rally- I will continue to trail stops higher on any market up move- and generate a larger % cash position.
My negative assumption is that Prices and the PE of the overall indexes was at an exaggerated high level overall - well above the historical averages- and we will now have to retrace back to sub historical valuations- So a -17% decline from the exaggerated highs of early 2020 with an excessive 24x PE valuation is really not a major correction. YET.
I will be trailing this rally with stop losses in place and the intention is to increase the cash %- and then sit on my hands, largely in cash , and see what shakes out-
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Post by sd on Apr 13, 2020 18:56:09 GMT -5
4-13 5 positions stopped out on tightened stops as prices had moved higher- Intentionally tight stops designed to take in profits.
35 Voog $156.00
49 VPU $130.00
29 VTI $137.06
21 VGT $221.93
65 VIG $109.98
Equity curve remains positive for 2020 YTD , account has now been greatly reduced in it's exposure- down to a less than 12% position largely in several of the bond funds- BND, BNDX, VXUS.
Despite the markets rallying higher- I cannot believe we will not go back lower when all is said and done- The damage is not yet being tallied- as many companies received gov't payments to keep their employees on the payroll- Which may not resume operations for another month- and the potential is that a vaccine will not be available for this fall when the virus is anticipated to return.
So, I still have a few small stock positions in the IB account- but frankly relieved to have accumulated a high % in cash with nothing at Risk....
The World will not ever return to what it was- there will be large changes across the entire spectrum of our economy, the work place, and perhaps socially will see permanent isolations.
Will we eventually achieve a vaccine? Will it be similar to the success of the Flu?
At our jobsites, we had a zoom meeting to discuss whether we expect our subs to provide masks or at least bandanas for their employees- I'm a strong proponent that that should become mandatory on the work place- until this scourge is eradicated- Lots of changes will come with the New Normmal .....
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Post by sd on Apr 14, 2020 17:06:27 GMT -5
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ira85
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Post by ira85 on Apr 14, 2020 23:24:57 GMT -5
I'm thinking a lot about this rally and whether to sit it out. I'm 100% cash. I've been in the camp of those expecting this to be a long recession and a long, deep bear market. But the reality of the current rally has me scraching my head. At the pace this rally's been moving it seems this could be a steep V shaped recovery completed in record speed. So far my skepticism has kept me out. But I was similarly skeptical in 2009 and didn't buy into the rally that eventually had a 400% gain. Well I bought part way in, but way late. I let it get away from me, far away. I don't want to make that mistake again AND I don't want to buy high and regret it.
I got to thinking about one of those old sayings, Buffett I think. “Be fearful when others are greedy, and be greedy only when others are fearful.” I'm wondering if this has any application now. It seems there are lots of skeptics doubting the staying power of this rally. The news is just so very, very bad. The country and the world will have terrible problems for the next few years it seems. Would Buffett say this is a time to be greedy? Unemployment is high. Businesses will fail. There will be bankruptcies. Earnings will go in the dumper. The Fed will spend trillions trying to temper these problems. Bad for the national debt. Bad for lots of people, but maybe good for a stock market rebound. Maybe unemployment and all the other signs of economic problems sets the bar at a level it will be fairly certain several trillion in stimulus will have some positive impact. Maybe a gazillion problems and unlimited funding for recovery efforts is a formula for showing quick economic progress. They say the stock market is a discounting mechanism. It doesn't reflect the present, but rather the future. If the future looks horrible now, but looks like we're making some progress 6 months from now, that may be supportive of a rising market now. There may be historical support for this scenario. There was a 324% gain for the 1932-1937 bull market during the depths of the great depression. Just a thought. -ira
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ira85
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Post by ira85 on Apr 15, 2020 15:48:35 GMT -5
next emtry
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ira85
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Post by ira85 on Apr 15, 2020 15:51:23 GMT -5
ira85 Avatar
Apr 15, 2020 15:48:35 GMT -5 ira85 said:
Reflecting on the Buffett quote about being fearful . . . I think the Buffett quote applies to the emotion of fear. It's the emotion, not calm analysis. Reading the comments following SA articles I don't see much fear. There are strong opinions, but not fear. The market's behavior seems more consistent with opinions, not fear. We are having big swings of buying and selling, but mostly selling. Being afraid of being left out of a rally is not what Buffett was talking about. I think an investor is showing fear when he says he's taking a beating in a broad sell off. He says he knows he shouldn't cut and run. He knows he should stay the course and not break weak and sell low. But he's seeing his retirement plans go up in smoke. He's sweating bullets trying to hold on. That's more like real emotional fear. I think that was what Buffett was referring to. We don't have much fear now. This rally has lots of doubters but not widespread fear.
I bought another position of SDS, short the S&P 500, for about 10% if my account. Once again I think the odds favor the next move to be down. I just can't believe the broad averages are getting such a large move upward. Seems the market must be over valued and risk/reward must favor the short side. Or so it seems to me. The DJIA opened this morning down about 500 points and closed down about 445. Many mornings are opening with multi-hundred point moves. Either the Bulls or the Bears are going to win this tug of war. I'm going with "Da Bears." -ira
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Post by sd on Apr 15, 2020 17:56:13 GMT -5
I agree with your logic/ Assessment/-Sentiment - but note that the present SDS trend is still down- Today saw a small upside in SDS-but It does not mean a reversal higher for SDS is underway- so i would employ a stop-loss that assumes that yesterday's low should not be breached- But that is me- Just don't allow your conviction to step in the way of the large bus of market sentiment if it continues to head in the other direction .... I have done that a number of times in the past, and finally learned (The Hard Way) that the market does not give a whit about my sentiment or assessment.
1 day of selling does not reverse a trend-Trend's tend to have persistence- and note that the price is still Below the declining fast 5 ema- I prefer to see an attempted true reversal bar -like April 1 - that Also closed higher above the fast declining 5 ema- that indicates some attempt to put in a reversal- Note that bar failed to have any follow thru- and the downtrend continued. Also - take the sentiment/logic out of the equation, view the chart and recognize that the Price action is not strongly bearish- It may become so tomorrow- but this was not a strong reversal of trend today- and still closed Flat from the open and also well below the Fast declining 5 Ema. The recommendation would be to trade the Chart- Not the news, or personal belief.
That Noted- for illustration on an entry today- The Position sizing approach- In this case- a 10% entry for possible position size- but only allows a 1% position loss as the max criteria- An Entry today near the Closing price also would assume a stop-loss under yesterday's low - Yesterday's Low is the logical place to set a stop if one assumes price will reverse and go higher from here-. Chart illustrates the premise- For round numbers- I illustrated an account with a $10,000 value- and a 1% Risk per trade- ($100.00 )
Note that one should never use a wider stop-loss just to try to see their trade work out in their favor- The rationale for a trade should be based on a premise- and if that premise proves to be wrong- or Early- the stop should be executed as part of a principled approach - painful though that may seem at times- over the long run it establishes a discipline that one can modify as needed over time... The function of trading early in one's career is to Learn, and not necessarily focu on what one Earns- it's about executing a strategy - and modifying that strategy if it fails to provide winning trades. (and reducing position size, Risk if one has a series of losing trades) .
Personally, I seldom try to take reversal of trend trades until there is a closing bar higher than the declining ema- And even then , I prefer to go long when the momentum is already in a decided direction- Often reversal of the trend trades falter several times, and have a high failure rate over all. I do Much better trading WITH the trend-
As all of my accounts are either Roth or IRA - I am no longer allowed to trade short or leveraged ETFs by Vanguard or IB...
Good Luck! Sd
i.imgur.com/PIGWLRH.png
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