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Tuesday, June 9, 2009

Hedging and Weighting (VIDEO)

"Precaution is better than cure." - Johann Wolfgang von Goethe

So we've had a fantastic run in the stock market. Some folks have made a great deal of money in this rally. But now we're facing trouble in the bond market, we're looking at seasonal summer weakness, and the Dollar has been crushed in recent weeks.

So, continuing the thoughts from Saturdays podcast ... what do you do? How do you buy a bit of insurance to protect your gains? What if you are low funded? How do you implement some of the strategies that I talked about on Saturday?

(Video Included. If you're seeing this entry elsewhere and cannot see the Video? Click here to view the entry ...)



Go Wings!

But let's be clear. Any Silver would be purchased against further dollar weakness, whereas anything like a short term buy in the SDS would be a hedge for weakness for stock market holdings.

So what does this mean for the Challenge Project?

I'm watching both the U.S. Dollar Index, and the DOW

If the U.S. Dollar Index plunges below 78 on rapid volatility, then I'm buying one oz. of silver for the Challenge Project, and storing it under the "Savings Account" funds, weighting it properly according to money management principles.

If the DOW Jones Industrial Average plunges below 8,200, I'll probably buy some SDS for the "Challenge Investing Account" for a short term position hedge, again, according to money management principles.

Late Edit: I find it interesting that since I put this video up this afternoon, I've already received some emails, that in essence state: "I'm wrong about the Dollar", or "I'm wrong about the metals"

I think such folks may have missed the entire point of my statements. It doesn't matter what your positions are, what matters, is that we are at a critical juncture at the moment, and what will you do now to protect those positions through hedging and weighting?

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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