Regardless of my investments I always keep cash on the sidelines. They say you should keep at least 25% cash on the side ready to trade. That said I believe it’s important to separate trading cash from investing cash. In other words, when the market falls you shouldn’t exhaust all of your cash averaging down your long term investments.
This is why in the past couple of weeks I wanted to demonstrate how I would trade using a certain amount of cash for short term gains. I used $AAPL as my stock of choice, and I traded the heck out of it, sometimes six times a day. I’ve been long Apple since $75, and $120, and I understand how to find a daily range in it very quickly. I also picked up new positions of TMI, EDS, AGM among others.
I made over 50 grand+ in the last two weeks in realized gains. This while my position on SYNM was down roughly 90k, and NEP was way up and near break even. I never worry about my long term investments unless there is a serious change in the fundamentals. I will average down SYNM as needed, but I won’t do that until I see a major move. Whatever the case, I own SYNM at under $2.60, so it’s really pointless to average down unless I see the $1.60 range.
I know we all don’t have, what seems to be, unlimited cash. …but that said, if I take my entire net worth I only have 20% tied up in the market, including the cash I keep ready to trade + average down. I suggest you all work on a similar formula no matter the size of your bankroll.
I also recommend you be *very* careful of investing in stocks you don’t understand. Don’t be afraid to take losses, and don’t go all in – ever – in any one stock. I was very disappointed to hear one of our community members buried himself in a shitty stock that I told him a few times to dump (in fact Kunal00 and I both were pretty clear, suggesting that, if it were us holding that garbage, we would dump it and buy PUDA instead). I knew it was a garbage play, and he was only down 20% at one point. I believe there was a point when he was slightly up too & he still held on! Earlier this year he paid off his debts – and now he’s left in the hole as this stock has shuttered into bankruptcy. He’s probably looking for a job, and he’ll likely quit trading as a result.
I can’t tell you how many times I’ve seen people quit trading and come back another day. Every time they come back they lose more money after making a little. Why do they keep coming back? You have to ask yourself this question — “How many times have I quit trading?” — If the answer is more than twice then you have *not* learned your lesson. Patience only pays off if you’re holding a winner.
So… in conclusion… Learn your fucking lesson… and don’t ever give up.
Good luck trading team!