How I Doubled Money & Dumba$s Trading

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I don’t expect to transact for the remainder of the year so this analysis will be very likely good for 2016.

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I did a complete 2016 trade by trade review of my IRA account, which is where I do all my trading, and the remaining accounts that I manage mimic closely whatever I do in my IRA.

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My total return for 2016, including cash which earned nothing, was 102%.  More than satisfactory.  But that is not why I did the analysis.

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I wanted to understand how I generated this return.  Here is what I found.

During the year, I made exactly 10, what I call, trigger finger-stupid-dumbass-mindless-impulsive-uninformed trades.  I lost money in 9 out of 10.  Fortunately, and since I had no conviction in them, I got out just as quickly as I got in, thus minimizing my loss.  And the tenth profitable trigger-finger trade, purely by luck, was a big winner.  Still, collectively I lost money on those 10 trades.

Here are the 10 stocks that got my blood flowing in 2016: DCIX, DSX, EGLE, GLF, KRO, AT, BXE, VRS, HERO and TOPS.

Other than these 10, I traded and invested in only five stocks during the year – these names I was thoroughly familiar with and have been for many years.  I knew the balance sheets inside out, understood the value proposition and upside/downside.

Approximately 53% of my 102% profit was from a single stock – Ocwen.  I bought it at a point where I could see no further downside in spite of the perceived risk.  When a stock goes from $60 to $2, $58 of risk has been taken out of it already.  This is not a case of easier said than done – it is actually quite easy to judge.  I understood the story completely and therefore put a lot of my capital on it and it paid off.

The remainder 47% of profit was quite evenly divided into four other stocks – CNX, GAIA, TROX and GRBK.  Here again, I knew the stories inside out and saw that a lot of risk had been taken out when I invested in them.

So what is the conclusion of this analysis?  For me it is:

  1.  Have some goddamn discipline and don’t give in to impulse – think long and hard before you press that “Buy” button.  Because 90% of the time, you will lose money on uninformed trades and quite unnecessarily so.  If you want to have fun and get your heart racing, go to a casino and get it out of your system.
  2. Continue to invest in and even trade stocks that you are intimately intimately intimately familiar with.  Because knowing the value proposition allows one have the conviction to put a lot of capital at work.
  3. Be patient and wait for the right opportunity.  This is the single most difficult thing to do but impatience is a sure way to lose money.
  4. To hell with diversification (or is it diworseification?) and liquidity.

I wish you all Happy Holidays!

Article by Oozing Alpha

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1 COMMENT

  1. It’s really excellent article well-written, I believe we can easily double/triple our money, but we just need to make sure we trade with proper method and strategy; it’s something which should be fairly enough to gain us good grounds. For me, it’s not hard through OctaFX, as they are too special having low spreads from 0.1 pips for all major pairs while there is also 50% bonus on deposit which is use able and helps working out so nicely with ease.

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