Friday, April 17, 2009


JP Morgan himself was once asked before the start of a trading day by a newspaperman what he thought would happen in the market that day. He said, "It will fluctuate."

If you trade on volatility alone, then the fundamentals don't matter as much but the technical indicators do and you have to understand them in order to make your moves. Otherwise, if you buy at $4 and sell at $4.20, that's a 5% gain. If you're gaining that each week, that's pretty darn good at many multiples of what you'd otherwise get in a "safe" investment like a bank CD.

I generally trade on volatility and average 10% a month profit on my pot. That's pretty fantastic, I think. I surely don't plan to quit my day job, but this "crashed" market has been a real boon for me. There are certain issues that trade within a very specific range and allow seemingly endless turnover. Those are my daily trades. There are some very speculative issues where two have paid off hugely (NCX is one of them.) C is the ONLY issue that I'm long in because I don't think it has reached its sell point for the near-term, which I would make around $5.20. And yes, I've taken profit and bought back in. And, no, I won't hold it for a year simply because a one penny dividend and a rise from $5 to $10 is ridiculous compared to what I can make churning that cash value during the same period.

One needs to know where one stands. When I started trading actively by my lonesome, I picked issues that I really couldn't afford, like Apple and Heinz. The numbers one has to hold to benefit from the fluctuations are not for the sub-$100K investor where is what I was when I started. But I did some studying, learned what I needed to, and developed a strategy for each issue I bought. Eventually, I had my own little system in place that was unsophisticated and it works. To date, I have not lost money on a trade. Oh, I may have broke even, but I have yet to lose money. And I've made what I think is a lot of money.

No, I'm not related to Bernie Madoff. What I do follow religiously is the rules of the marketplace as a contrarian. And I don't react, ever. Markets go up and down - that's what's supposed to happen. So, when C first tanked this year, I waited and waited and waited until it started sliding sideways and stepped in and out from around $1.50 on up, like paddling a canoe. I figured the valuation, discounted, would have me stop at around $3.00, which is what I did. With the recent bump-ups, I was tempted, but I had a rule to follow, and I kept to it, selling when the pendulum swung above a certain range and buying back when it went the other way.

In my gut, I felt that C was the "worst" of the bunch and that okay news on a Friday, of all days, would do nothing for it. Still, I had my range. The bottom was never reached and neither was the top, so what's a ten percent downswing in one day compared to the gains of the last month? A correction? Isn't the risk of commercial and retail credit defaults and a fer-sure recession putting downward pressure on Citi? Of course it is. But good times are being had by all. Maybe it's time for a reality check.

It's frustrating to not wake up with an extra fifty grand in your account, but that's life. So, if you bought at $3.50 or whatever, you might not be a millionaire, but you made money, and that's a good thing. Will C reach my target of $5.20? Sure, it will. Will it reach it in the time frame I want it to? Maybe, maybe not. Heck, I would have wanted it to reach $5.20 ten minutes after I bought my first shares at $1.50 - didn't happen. The super-fat, genie-inspired, pot-o-gold happened to me just once and is not likely to happen again.

Why? Because that event was sheer, dumb luck. There's actual work involved in making smart trades. Reading, research, thinking, being attuned to events and having a fundamental understanding of business and economics are all important factors. But it sure beats digging ditches. Or scheduling freight.

People ask me for tips after I tell them why I'm quizzing them about their feelings on the job market, cost of living and other such general stuff-of-life. I smile and break out this old chestnut, "Don't bet on the horses."

Investing in an equity that's not doing anything for you and then griping about it is like being in a bad job and gripping about it. Make a change. Are you in profit? No? wait till you are and sell out. Doesn't matter if it's ten bucks. Maybe leave some in so that you don't feel like an ass when it shoots up to a gazillion, Because the time you waste peering at 30 cent swings costs you money. It's time better spent ferreting out worthwhile issues. They're out there - go get 'em.