MTG reports next week, currently the stock is selling off this may be just due to general market/industry sentiment or because people are reducing exposure prior to earnings or positioning short prior to them. If you have a good idea of what they will report but the market is saying other wise you should reexamine your convictions in case you missed something. It may be better for you to take a position after they report earnings to catch the drift up if you are correct and reduce the risk of being wrong. If you understand the business and the reported results you should be able to act before the crowd. You should also realize that the market not only looks at the immediate earnings but also at the trend over a much larger time frame to value a company, this means that they may report great numbers only to sell off immediately or a few days after. The insurance business is valued differently then other sectors also, you should google the various ratios that can be applied and compare MTG to its peers. I also agree that your risk/reward on your trades are backwards unless you have a high and repeatable win rate. AAA30
Jim, stick with it and only trade high R multiple situations, where your reward is at least three times your estimated risk.
As others have said - if you are risking more than you plan to make, your win % better be awfully high.
Thanks for the input guys. I learn so much by reading yours guys post. I got my ass kicked so much in the Jan & Feb. I switched over to this strategy which I took from a member of ET. I have not worked with this strategy long enough to know whether or not it works. Last month was +2.5% The trading broke down to this. 3 stops at 6.5% 3 dogs that wouldn't hunt +.5% Held onto just long enough to cover Broker cost. 6 stocks @ +3% to 5% portfolio value. Cash not using Margin January 1=$50,000 March 10 = $34,128 March 30 = $34,988 Thanks for any and all advice.
I say go back to doing EXACTLY what you did in Jan/Feb, with just 1 minor exception. Sell when you think you should buy, and buy it back when you normally would have stopped out or gone into panic and dumped. Think about it. The impression I get is that you had an almost flawless record of losing. that's the same as having an almost flawless record of willing if you are on the other side of the trade. just my 2 cents. Paper trade it first.
=============== JB; Good idea on your 6.5% stop, avoid margin; may want to aim for more than 4%, if market gives Frankly JB ,,that MTG [or did you mean MTH]-homebuilder] looks like on BOTH , the polar bears are winning on the short side; 1 year chart -down 50 dma -down 200 dma = down NOTE how BOTH MTG,MTH are doing much worse than SPY/1 year; good ''way to get killed'' Wisdom is profitable to direct
If you are looking at home builders, there are better ones out there at lower prices. However, I do not think home builders is a wise investment right now. Also, any financials who have big exposure to loans lower than prime may be a problem. If they disappoint when they report, which is a possibility, you will get crushed. You may want to consider other industries such as biotechnology, Internet, Energy, etc. I think there is going to be a good amount of pain still for the home builders. There is just too much inventory that has not been sold. If we go into a recession, that will not be good either. Also, consider, the huge "correction" in February, I am sure that was a big hit too. A correction like that, while not ordinary, can happen again. As a previous poster said, this market is very choppy. This past week was pretty good, cause of little data. Next week will prob. trend down then go back up again. 4% is not bad if you are trading more than one stock. I usually aim for a 8% - 12% return, then again, I am also trading around 30 stocks at a time. I do not use tight stops though. Sometimes that is good, and sometimes that is bad.. Rarely do I have a stock that goes down huge that does not rebound within the next day or so. Anyway, you should test your strategies first before really going into it. It can take time to actually put together a plan that consistently works. Sometimes, like on a sell-off, no plan will work. Following the daily trends and market movers also is a decent plan. Have done this several times in the past month to make some nice gains. Reversing when buying to sell and to sell to buy has worked a couple of times.. But, one thing to definitely consider is if you are having a day that is just not working for you is to quit for the day. Some days for any traders are just bad days. A good trader knows when the day is just not working and to call it a day. In terms of the dough you lost.. It is a learning experience. No trader goes in to the market wet behind the ears w/o taking some losses. It is call learning.. Everyone does it. The ability to correct your mistakes and lessen your losses and to eventually turn a profit is the goal. Start small with solid companies, after a while, then move to higher risk companies. Once you build up a healthy portfolio, then you can put together some risk money, usually 1% or less of your total portfolio, and invest it into some early stage bio or something. Everything is a learning experience. The question is.. How long will it take to learn to play the game in your favor?