StockBlade.com: Every Investment Should Begin As A Positive Trade
March 26, 2008 12:45 PM
Many people think of “trading” in the markets as risky and a bad idea. The reality is that every investment begins as a trade. The only difference in the semantics is a perceived timeframe to hold the position. A “trader” may be in the position a minute, an hour, a day or a few days. The common perception of investing is to buy and hold for a very long time. Unfortunately, the vast majority of people never have an exit plan and therefore will eventually lose most of their profit or make market returns.
To be a good investment it should begin as a good trade. If you are wrong on day 1 it significantly increases the odds you will be also wrong on day 100. CHK is a recent example. I said long CHK. A trader could have easily taken a $1.00 profit within an hour. If you have a longer term view, I gave the entry point to be long CHK and your investment would be significantly positive in a matter of two days.
On the other side, if you had invested in AEM at $83 last week when I said the trade was to short it, you are down $13 plus in a week. It is possible that the investment would work out over time. It is also possible it will never see those levels again and continue to fall.
If you want to make above average market returns, EVERY investment you make should start out as a positive trade….
Our goal is to provide ”trades” that are we believe will be in our favor on Day 1 and still be in our favor on Day 3. That will provide an opportunity from that point to hold the position or take profits, depending on your particular timeframe of investing.
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I believe this is the most important concept on our site. EVERY stock you buy begins as a trade, regardless of how long you intend to keep it. If you can have the best entry points, your odds of beating the market by a WIDE margin are greatly increased, IMO…..and…you have options when you are ahead after 3 days….
I took an opportunity to buy GE at 31.83 for a long term trade. A 14% decline in a single day was a bit over done IMO for a company that post solid earnings like clockwork year after year. Nice yield also makes GE a good investment in the low 30’s.
Agreed, but GE will move with the DOW here. If the DOW had fell, GE would be lower as well. But the risk is probably far less being long GE here than the general market as it has already had it’s “haircut”.