Tom
Market Commentary | My Blog | TSP Talk Plus | |
I am not a Registered Investment Advisor and this is not investment advice. Please do your own due diligence.
Word Problem:
Suppose you have a sufficient balance (six figures). You trade $10,000 per trade.
First trade, you're down 76%, or you now have $2,400 (plus six figures).
1. What dollar amount to you need to recover? $7,600!
What percentage is that? About 400%? NO.
It would be about 400% IF you were only trading with the $2,400! But, guess what? you will be trading with $10,000 on your next trade! So guess what else, you'd only need 76% to recover... or a lower percentage if you trade with more than $10,000!
When you're down to a few chips at the poker table, you don't hope for that 1000% come back, you reload up to the table max! You sit at the $200 tables (for example), not the $1000 tables even though you have over $1000 available to your atm card. It's all about money management.
It's not about the volatility of the instrument--it's about the money management. Now the above example could be re-jiggered so that the percentages are based upon the total account balance...or the total net worth of the trader. Point being folks trying to judge others by only 'what' they are trading clearly don't know a lot (or maybe enough) about trading, or have ulterior motives. (Not referring to anyone in this forum!)
Everyone can't trade volatile stocks, but not because they're volatile, but because they don't know how.
[COLOR=#0000ff][FONT=comic sans ms][I]"In the land of idiots, the moron is King."--Unknown[/I][/FONT][/COLOR]
Nope 2 days wouldn't be a "big deal" either. Maybe not even a week, or two, or a month. But the longer it goes, the worse it gets, and the effect adds up. Someone can just look at a chart of any leveraged ETF that tracks the VIX to see how drastic it can be. Granted that is probably one of the worst case scenarios... but so is NUGT/DUST... just look at the 5 year chart of NUGT
NUGT up 4.72%, DUST down 7.76%... what a joke.
A couple of years ago I wrote about a system that can not lose, but the boys won't let you do it...
Just short both NUGT and DUST and hold. But try finding shares to short. It ain't happening. At least on Scottrade. I tried for months.
Tom
Market Commentary | My Blog | TSP Talk Plus | |
I am not a Registered Investment Advisor and this is not investment advice. Please do your own due diligence.
Rules:
- Trade what you see, not what you believe
- Don't put stuff in your signature that a Mod doesn't like
"Government exists to protect all people’s rights, not some people’s feelings." - A. Barton Hinkle
Great Tools:
http://www.CreditKarma.com
http://www.Mint.com
http://www.SaveUp.com/r/nmJ
[COLOR=#0000ff][FONT=comic sans ms][I]"In the land of idiots, the moron is King."--Unknown[/I][/FONT][/COLOR]
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