But don't you think there is lots of chart evidence that Trends exist? 2 Steps Forward (Bid the price up), 1 Step Back (Take some profits off the table), etc.?
The Trend Is Your Friend⦠Till The End⦠<iframe width="420" height="315" src="http://www.youtube.com/embed/LiE1VgWdcQM" frameborder="0" allowfullscreen></iframe>
<<< But don't you think there is lots of chart evidence that Trends exist? >>> Of course it exists..... in the past. It also exists in Las Vegas, where I've seen winning and losing trends at various table games. Betting on a trend in the stock market, has the same chance of succeeding over the L-T, as betting on the current trend at a table game. In fact, an argument can be made that the longer a trend goes, the more due for a correction (or profit taking), it is. All I know is, the stronger the "current" trend is in a stock, the higher the price you are paying for it. If you didn't like a stock at 21, 22, 23, 24, or 25,... what made it so apealing at 30? For me, that is NOT investing. That is lemming behavior. And you know what eventually happens to those trend following lemmings, as they climb the mountain higher and higher. That's why trend followers are so nervous, and tend to use extremely tight stops, and panic sell all the time. Because they live in fear, that those they have been blindly following, will suddenly take profits. OOPS! There goes the trend. http://www.flixxy.com/trumpet-solo-melissa-venema.htm
OK, so you're saying Trends are a Rearview Mirror Indicator and can't be relied upon as a Future Behavior Indicator. If so, what do you base your stock entries and exits upon? Do you buy when the stock is selling below its True Value after a Market Correction, and sell when the stock is above its True Value after a Market Rally? (Assuming I'm right in calling you a Value Investor - please correct me if I'm wrong with these terms) BTW: That very young lady was an excellent Trumpeter. So much poise for her age, and such beautiful tone!
<<< If so, what do you base your stock entries and exits upon? Do you buy when the stock is selling below its True Value after a Market Correction, and sell when the stock is above its True Value after a Market Rally? (Assuming I'm right in calling you a Value Investor - please correct me if I'm wrong with these terms) >>> I think of myself as a "simple investor" (Anticipating comments on that one). Whether I'm selling naked puts or credit spreads, I simply select prices to "potentially" get in, at prices I think value hunters will find attractive, and thus lend support to,... or buy up to, if the stock suffers a correction below my strike during a bad market. I use a combination of basic tech and fundamental analysis. I also don't follow the "BECAUSE I CAN" idea of investing. That being, engaging in a lot of different option strategies, simply because they are available, and others use them. Hoping a stock stays "inside" or "outside" of certain trading ranges, is not for me. Nothing wrong with it, if it works for others. Just not my thing. I'm also NOT into "rolling", when a stock goes bad. Nothing wrong wiith it, if it works for others. Just not my thing. Rolling is simply a fancy way of getting out of a stock trade that is going bad on you, and then getting right back into the same deteriorating stock. I'd rather look for another stock to earn a similar credit, per the same unit of time,... before I'd consider getting back into the same deteriorating stock i just dumped. Some investors like to roll, because they believe they're not really taking a loss, or they are minimizing a loss, since they're getting back into the same stock. I love a good fantasy. I really have no idea when to sell a stock. Nor do I know what stock will rise, or how soon it will rise, or how fast it will rise, or when it will stop rising. or why it rose to begin with. Hence the reason i let the option automatically take care of that. BTW: That very young lady was an excellent Trumpeter. So much poise for her age, and such beautiful tone! >>> Wasn't that the most beautiful version of that song you've ever herd?
First, how do feel about the word "Investor" vs. "Trader"? I think Selling Puts makes us Traders. An Investor to me is someone who buys a stock and holds it because he wants to be part "owner" in a company he likes, etc. Finding a stock that's "Bottomed" or "Consolidating" and Selling Puts at Strikes below the Support level is an excellent way to use Bull Put Credit Spreads. You get good Credits because the stock has been going down (increasing the cost of the Puts you're selling), and you don't have to worry about it "recovering" to make money, as you would with buying the stock. All it has to do is stay at or above the Support Level and you score. I'm currently trying to do this with EWG (18 Strike Price), CROX (15 Strike Price) & GLD (150 Strike Price). Rolling and Adjusting Spreads just incurs lots of commissions, so I generally just close out a loser and then rethink my situation. I only do Iron Condors with SPY and have had some luck. But got killed with individual stocks suddenly spiking up through the top of my ranges! Also believe in just working with a couple of techniques and getting them down, rather than trading all different styles at once. So now I only Sell Bull Put Credit Spreads for stocks, and Sell Iron Condors for SPY as I mentioned. Have a simple set of rules for both which I can ACTUALLY FOLLOW! Whereas I used to write out lots of rules my "Trader Psychology" couldn't deal with, be all stressed out, and then break them all the time! P.S. I was in the Music Business for 45 years, so I know a thing or two about it - and that girl is GOOD!
<<< First, how do feel about the word "Investor" vs. "Trader"? I think Selling Puts makes us Traders. An Investor to me is someone who buys a stock and holds it because he wants to be part "owner" in a company he likes, etc. >>> A trader is someone who trades in terms of days. weeks or months. An investor is a year or more. But in terms of wanting to be a part owner of a company, unless the company pays a dividend, you own nothing and get nothing. Yeah, sure, they will send you stuff to read, and you get to vote on stuff, but your vote means nothing. Unless you own 10% of the company, they will always end up doing and getting what they want, regardless of your vote. So really, unless the company pays a dividend, being a stock owner of a company means nothing. The most recent trade i made was last week, when I sold a $30 naked put on CE for August. Got a credit of $0.75 for it. Really like the companies strong fundamentals, so I'll be happy to own it for a while, if it gets put to me next month. Reasonably valued, financially strong, quality company,... but in a volatile sector. Happy to sell calls if that occurs.
Just because you use options doesn't mean you aren't an investor, though I would think investors stick mainly to selling puts and calls for extra income. Another important trait is that the investor only sells covered calls or sells puts with the full intention of holding onto the stock if it gets put to him. Spreads and naked options are normally the domain of traders imo.
Good points. Let's see what Investopedia says: Definition of 'Trader' An individual who engages in the transfer of financial assets in any financial market, either for themselves, or on behalf of a someone else. The main difference between a trader and an investor is the duration for which the person holds the asset. Investors tend to have a longer term time horizon, whereas traders tend to hold assets for shorter periods of time in order to capitalize on short-term trends.