We missed a great buying opportunity a week ago Monday and I'm not happy about it. You may recall that the Price of the VectorVest Composite got crushed on Wednesday, November 19th and Thursday, November 20th. Fortunately, the Model Portfolio was long with some high-volume Contra ETFs, so we were feeling no pain. The Price of the V V C was also down sharply on Friday, November 21st, until it was rumored that Mr. Timothy J. Geithner was to be recommended as the next Secretary of Treasury, sparking a monster reversal on huge volume. We went into cash on that rally and noted that "we are looking for a new short-term trend to develop." Why didn't I prepare you for the possible follow-through rallies that occurred on the next five days?
The reason is that I had simply become so hidebound by all the rules, procedures, conditions and restraints that we were applying to managing the Model Portfolio, that I wasn't using my head anymore. That was crazy. If I want to make big money in this market, I've got to recognize and move quickly to take advantage of great opportunities as they occur. This is what I intend to do in the future. Rules are nice, but "He who hesitates is lost." From now on I'm going to do my best to Seize the Moment.
QUICKFOLIO.
Day traders love high volatility. It gives them opportunities to quickly make huge profits. So they love what most of us hate: big, fast price movements. As far as I know, most day traders have a WatchList of volatile, high-volume stocks that they watch like a hawk. While every trader has his or her special way of playing the game, many of them live and die trading support and resistance levels. I have found this technique to be tedious, so I look for movers and shakers another way.
I use a tool in VectorVest RealTime called, "QuickFolio." It allows me to create a portfolio of stocks and track their performance from the Opening Bell with just a few clicks of my mouse. For example, I ran our "Buying Contra ETFs" strategy as of last night's close and made a QuickFolio of the top five stocks ranked by AvgVol Desc. VectorVest RealTime actually began tracking this portfolio's performance as of 8:00 AM this morning.
What I really like to do is create a variety of QuickFolios of stocks on any given day and see how they break out of the gate. Then I'll cherry pick my trades from stocks in the best performing up or down QuickFolio.
TAMING THE TIGER.
While day traders may love volatility, investors who can't sit at their computers all day hate it. So how do they make money in this jungle of a market? They execute low-risk trades by hedging their bets. Let's say, for example, that you wanted to short some stocks, but were fearful of explosive up moves that could hurt very badly. To protect yourself, you hedge your short stock positions by buying out-of-the-money Call Options. Imagine, receiving substantial credits to your account by shorting stocks and limiting your risk with relatively low-cost Call Options. To see how it's done, visit the VectorVest University to see Mr. Glenn Tompkins' outstanding "Strategy of the Week" presentation: "Taming the Tiger."
