My Trading Tricks/ Rules/ suggestions

Top10:

1. Static/ tactical asset allocation for preservation of wealth. Secret of money making is avoid down drafts. Its OK to be in cash & pounce on opportunities.
2. There are three trends, uptrend, down trend, side ways. Must play according to trend. Its foolishness to trade against the trend.

o    Look for good stocks “long” term trends. If its in uptrend, buy on dips. If its in down trend, sell on temp run ups. Watch-out for reversals in trends. Exit when too much whamming – that means trends are changing and you are not able to figure it out.

3. Use Fibonacci to find tops & bottoms. Use Fibonacci on Balanced portfolio: (must sell at 100%, buy @ 0% forget middles)

o    Stocks: SPY, VBR, EFA, EEM, DGS, DLS, VT,

o    Bonds: AGG, 

o    Inflation: TIP, GLD, SLV, VNQ, DBC

4. Keep most money in cash, sell options on SPY, EFA, EEM, TLT, AGG instead! Must keep cash enough to cover all excercised options at any time. Lock cash in CDs to avoid temptations. When markets are beaten down, buy out of money options, when they run up by out of money avoid OR buy too much money in options so corrections don't affect you.
5. Buy CDs only to reduce risk for "TLT put strategy". But must keep CDs to hedge. TLT enjoyed Real Long Term 20 year trend due to falling interest rates (since 80s interest rates fell continously in US). Now we might see real long term of increased interest rates. So be careful.
6. MACD is good to detect overbought or oversold, reversals. But be careful as trends could continue instead of reversing
7. Use 50% regression lines for trading (prophet.net)
8. Don't get married to a stock, take the huge gain - if it was RED HOT last year. HOT, you can continue to hold
9. Buy aggressive growth funds after bear market: Zack's port, dow port, fools, UNBOX, take margin for 2X etc.
10. If buying individual stock, make sure its free from "litigation to management for malpractices" & is financially solid - low debt etc. I got burned on Riteaid
11. Sell in May & Walk away
12. Christmas is selling time, August is buying time. Don't try to buy back in xmas or sell in Aug. If you are doing opposite, have a good reason.

§  Easiest is to buy xlk on dips in Aug-OCt for xmas, jan rally

1. Hold off urges to respond to market gyrations. OR hire a investment advisor. Stick to your investment rules. OR pay 1% for someone else for not being disciplined yourself. Remember "behavioral finance" theory
   
   

Others:
1) DEM (emerging value), VNQ (real estate), MDY (Mid cap) has best long term returns.
2) Buy an asset class, hold for ever
3) Buy good stocks near IPO, hold for ever. Average down if needed.
4) Diversification in different asset classes help reduce variance of portfolio. More asset classes you have, you can get closer to efficient portfolio. You can achieve same returns with just 3-4 asset classes, but variance will be higher. CAPM model.
5) When DCA in VT or VTI, invest weekly in weeks when price

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1. Bear Market Rules:

·         If you can identify its Beginning of bear market, here are rules to follow:

·         Oversold conditions may represent “trading” opportunities & not “buying” as prices will get worse

·         Any run ups are selling opportunities or starting put positions

·         Mitigate risk,

Options:

** Identify support & resistance levels for correct strike prices.
** Have exit plan before you enter a position, also have worst case scenario listed.

Rallies:

1. 
   
   
   
1. Tech winter rally
2. Small stocks Jan rally
3. Natural gas summer rally - usually NG does well in first 6-9 months of year. Falls during winter! I looked at 84-2008 data of fsngx & usually its possible to sell at profit during the year
2. 
   
   
3. Look at 200 day moving averages. Avoid long bear markets by not investing more patiently (not aggressively). On reversals, whipsaws are common pitfalls. You can't do much about it (but don't be scared away from the trends).

Plot 15 years chart in Fido for EMA 50,100,200; MACD 50/200/9; obv together to see what are major bull or bear trends for markets. You will be amazed with MACD above 0 line. Can invest more aggressively. When below 0, avoid temptations to invest. SPY ICFEFA VWO

When some sectors/ asset classes / stocks are falling – let them fall more – AVOID them till they start going side ways… avoid even more as often another leg down starts after going sideways

4. DCA a sector till you make better than 10% return per year & Sell!

It can take several years for a sector to bottom out. So be very careful to catch falling knife. You could buy to make quick trade for short speculative oversold condition. But to find real bottom can takes 2-5 years of patience. Also don’t just sell away just before another run up in stocks. Be also careful to sell dud stocks from sectors. Ideal condition is to accumulate battered places & hold them for 10s of years so they give 15% per year return. Sell them on hottest points.

Hottest sectors held too long will also return in extreme losses (remember buying XLY, ICF, UNG when these were hottest?). Momentum strategy says to exit at first sign of trouble. Bite the bullet for losses or whip-saws. "last bad 20 years will result in good 20 years returns. Last great 20 years returns will result in extremely bad 20 years returns"

Holding X% of VT & Y% of total bond might be one of best strategies over long haul. FTSE All world index returned 9.8% from 1962-2007

8. Look at oldest mutual funds returns
9. New investments:
   
   
   
1. Asset allocation
2. XL* Strategy
3. Follow the winners
4. Focused funds - look what they are investing in?
5. Managed funds - look what they are investing in?
6. Investment news letter - (these claim to beat S&P at times)
   
   
   
1. Navallier (NFMAX), WMW, Market Graded (SFV), ValueLine (PIV), Dow Theory forecast (div, long term buy list, focus buy list etc)
10. 
    
    

Research paper: Forbes down rating is better than uprating for predicting the future.

Forbes up-market ratings would have helped predict betas but would have been of little use in predicting future fund performance. Forbes down-market ratings may have helped predict fund returns over the following year and fund risk-adjusted returns over periods greater than one year

* Research Academic papers on stock markets/ asset pricing/ portfolios etc: Ex: http://faculty.chicagobooth.edu/finance/papers/