Time, Effort, and the inteligent use of Leverage
Thursday, July 3, 2008 | KLong (kenlong33) Is this Spam?Time, Effort, and the inteligent use of Leverage
Is a good investment composed of value, or is composed of profit? They are not the same thing. Value is an important criteria when I'm buying something I want, or might need to buy either way, generally not stock in someone elses business. Although value is a generally overall good indicator when used in conjunction with other analysis.
Profit is what I invest or trade for, and profit is composed of price change and TIME. The one thing almost every value investor convieniently forgets.
The way to make a lot of money in the market is to target movement. Value oriented, growth oriented, sentiment oriented, it doesnt matter, as long as it moves in a reliable and predictable fashion. This could mean targeting value, but not stagnant or falling value, unless your intentionaly trading that particular condition.
The best percurser of movement, is movement.
This could be a trend, or an ocsilating range. As long as it is reasonably predictable, and the movement is large enough and fast enough to produce the desired returns.
Unless your a champion market timer, the way to trade these most profitably is not to try to pick bottoms or time reversals, but to wait for confirmation, choose an entry, and trail an appropriate stop.
Capturing middles, its at the heart of classic trend following, not trend predicting. This is how the vast majority of the most succesful traders and investors have worked over the years. Be willing to give up the first 20%, and the last 20%, and target the 60% in the middle. Target stable trends that are moving at an acceptable rate, this rate will vary depending on your time frame and perspective. Check both your growth and value analysis, if you like, and target trends with good potential for continuation. Target overbought and oversold extremes within the trends range as entry and exit points, and dont always buy in one lump sum, scale in and scale out.
And use leverage, not only financial leverage, but the leverage of time and effort as well. Pay others to do work for you. But beware, the financial markets are grossly overpriced, compared to any other industry, compared to the degree of effort or knowledge involved, and compared to the quality of the product.
Now this is a area where its wise to use a value and quality assessment. As a comparison, fundamental analysis is a dirt cheap commodity, compared to the effort involved. Good fundamental analysis can be found for free on most major financial sites, if you know how to use it, or very inexpensively with the assistance of a good analyst or writer. Technical analysis, however, is a grossly overpriced commodity, its relatively easy and worth learning to do for yourself.
Further, the use of options can be difficult or easy, depending on how you go about it. The hardest things are timing, and managing volitility and time decay, simply choosing options on stock positions is easy, using options safely and for what they are really worth is difficult. If you can find someone who does this, and does it well and successfully, who you can trust and understand, its like having a gold mine. There are a few out there, and here, but by and large they are hard to find, most talk and write better than they trade.
