Making Money on the Long and Short of It
You may think Wall Street has a few level playing fields left. Think again. The system has been manipulated to introduce high-level volatility into every investment equation.
Who gets hurt from this built-in volatility and who benefits? Suffice it to say; every regular buy-and-hold investor loses and every pro-active firm and brokerage house wins.
If you are a regular Wall Street retail customer whose assets are being money-managed, you may likely be advised to maintain a buy-and-hold strategy simply so your fund handlers can keep control of your assets and continue to charge high fees.
And, all the while YOU are encouraged to buy-and-hold, the big boys and smart firms are busy trading using dark pools and private trading venues that “regular” investors such as yourself, have ZERO access to.
How does volatility enter into this? If you’re one of the vaunted Street club firms, you and you alone can take advantage of this contrived “volatility” factor using short-selling and “decimalization.”
Decimalization is the process of allowing incremental prices in pennies. This basically lowers spreads and increases liquidity. Who benefits from this? Those big players with access to those aforementioned, private asset collection pools.
So, what should an ordinary investor with relatively small positions do?
* Dump the buy-and-hold model UNLESS they have a very STRONG position with a PROVEN stock and they intend to BUY more of this position as prices drop.
* DO what the big boys do – not what they big boys TELL them what to do. The big boys think and trade like pro-TRADERS.
Pro-traders have a well-thought-out long range scheme with a prepared exit plan. Pro-traders are diversified amongst differing asset classes. They are ever-vigilant and ever-ready to drop a failing position. They know when to hold’em, and know when to fold’em.
* They use a discount online brokerage firm such as e-Trade, Scottrade or TD Ameritrade UNLESS they have a brokerage advisor with magical insights.
* Know the long and short side of trading. There’s money going up, money going down. The big boys know how to take advantage of built-in volatility. So does the pro-trader.
Be a pro-trader. Do your homework. Use volatility to your benefit. Avoid greed. Know when to walk away from bad positions. Be diversified. Have a trading plan. Have an exit plan. Use a discount broker. Game ON.
Inspired by ootfih (one of the few i heed) – the incisive Shah Gilani