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Monday, June 29, 2009

Monday Challenge Project Summary: June 29, 2009

Today's Challenge Project Balances:

Investing Account Balance: $514.74
Stock / Futures Trading Balance: $1,464.14
Online Savings Balance: $25.00

The original video explanation of the Challenge Project is to be found here.

Some time ago I stated that I may split up Rule No. 2, into weekly segments; or, $25.00 a week.

This recap the first of the Weekly segments.

(Video Included. If you're seeing this entry elsewhere and cannot play the video? Click this link to go to the exact blogged vlog entry ...)



Since we are not yet into July, there will be no implementation of Rule No. 2. We'll discuss that next week.

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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.

Saturday, June 27, 2009

Week In Review: Duck n' Weave from the Looters

"Evil requires the sanction of the victim." - Ayn Rand

Welcome to the 'Week in Review'.

After a review of the markets, I discuss trading 'pay service's as well as the lessons that I have learned throughout this economic crisis ...

(Podcast Included. If you're seeing this entry elsewhere and cannot play the podcast? Click this link to go to the exact podcast entry ...)



Click here to download this podcast.

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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.

Thursday, June 25, 2009

Out of the Cattle, Into the Bean Oil ...

Is it just me, or are the markets just ... blah ... from a trading aspect. Regardless, in my personal accounts, I'm long the Bean (Soybeans are called the 'beans' to commodity traders) complex from now until about July 15th.

I was out of that Live Cattle Call option trade yesterday. Ended up closing out of the trade by selling it immediately at the start of trading (And thank goodness, I missed that bloodbath later in the day),

Wednesday, June 24, 2009

Challenge Project: Live Cattle Call Option and Theta Decay (VIDEO)

"To think too long about doing a thing often becomes its undoing." - Eva Young

I wanted to put this video up regarding the latest trade in the Challenge Project, because I think it will adequately demonstrate the variables that you need to consider, when it comes to Futures options, and how the theta can eat away at the value of your option, even though the market may head in your favor ...

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



As Karl Denninger has stated; when it comes to options, early is wrong.

Here is a link to my playlist, that discusses Futures Options

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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.

Monday, June 22, 2009

Challenge Project: The FAZ (Triple Short the Market ETF)

So I have a record of it, and for those that didn't catch my Twitter update, I wanted to put in a little note that I put an order in the Investment Account for the Challenge Project to purchase 25 FAZ at 4.95 limit stop, GTC (Good until Cancelled - 60 days), as well as an order for 200 at 4.95 Stop GTC for my own accounts. The FAZ is trading in the pre-market at $4.83. So the market would have to confirm my thoughts, and make it up to $4.95 (meaning the stock market would be falling), before my order is in and working. This is just a short term hedge

As I mentioned in the "Week in Review" podcast, this is a way to hedge my Dividend DRIP holdings with what I call a "locked leveraged" item. As such, it would be a position trade. Position trades I carry out in my Investment Accounts.

So the orders are in and working. In addition, the Live Cattle option is just within a few ticks of my profit objective at the moment. I'll have a video of that later ...

Edit: Filled on FAZ for the Challenge Project at $4.90, 25 shares. That's in the Challenge Investment Account.

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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.

Saturday, June 20, 2009

Week in Review: Economic Strangles and Cost Basis! (PODCAST)

"First rule of business ... buy cheap and sell dear ..." - Colonel King, King Rat by James Clavell

Each week, I have a "Week in Review". We have a brief review of the markets, and then discuss the conversations and hot topics of the last week.

Yesterday, I talked about the sort of maneouvers that would move me towards the inflation camp. Let's say you're not sold on what I'm talking about, when I mention deflation, and even the possibility of hyper-deflation. What if you came from a "hyper-inflationary" camp? Are you a bit confused? A bit anxious? What if you want to go 'both' ways? Is that possible?

Yes.

I call it, an 'economic strangle' ...

(Podcast Included. If you're seeing this entry elsewhere and cannot play the podcast? Click this link to go to the exact podcast entry ...)



Click here to download this podcast.

Here's the link to Karl's post I mentioned regarding the dangers of opened-ended over-leverage. It's pretty good.

Here's a picture of the Bond Curve:

Note the different maturities create the curve ...

Peter DID say Gold is going to $2,000 in 2009. You have six months Peter. If you can listen to that video, congratulations. I can't even stand to listen to the guy.

Yes, I know I said I hated to rip on people. But I am calling him out by name, because the strategies he espouses, from my experience, and according to my opinion - will send you to the poor house. If you saw someone selling snake-oil to someone, and you had expertise in that area, say ... you were a doctor, wouldn't you step in and try and help? Wouldn't you speak up?

I'm trying to offer other thoughts that will open peoples eyes. To do what I always try to do - help. When I personally believe someone is being conned? I will step in, call out the person by name (as much as I hate to do that) and point out counter-points.

So again, let's look at the strategy that I mention in the above podcast.
  • $2000 Strike Price option on December contract Gold = Hyperinflation or expanded fear bet (locked leverage potential. Total Risk without exercising the option = $100 per option)
  • FAZ = Deflation bet. Say, buying 25 shares at $5.41 stop gtc. Total cost would be $135.25, plus commissions. (locked leverage)
  • JNJ, PG with DRIP on = stagflation, nothing happens bet, as well as a hyperinflation Peter Schiff scenario bet. (compounding posibilties)
  • $1,000 Stored away = Deflation bet.
Equal weighting, that would cost you around $1,760.00 in today's prices. Heck, if the FAZ does what it did in the past during huge down moves? You could make $3,000 on the FAZ positon alone. Weight those positions however you think the economy will turn. In other words, since I believe that deflation is coming, I'd have more FAZ. And be aware of your cost basis. Be aware that as December approaches? Your option will expire (worthless if you don't cash in on it before December).

The biggest risk I see with such a strategy, is that everything moves sideways. Gold moves sideways or down? The option expires worthless by December. The stock market moves sideways or down? Your FAZ doesn't gain any value, or loses a little bit. But even if the stock market moves sideways? Your JNJ and PG stocks will be accumulating dividends, and thus the size of your position increases. If the dollar falls, or even stays flat? Your $1,000.00 isn't earning you anything. But on the other hand? You still would have $1,000 in emergency savings that you could use.

Even if you believe Peter Schiff's thesis (which I dont), his actual implementation strategy is a disaster. I personally believe it's almost criminal.

Remember, with any such strangling strategy, your timing would have to be just right, and it's all about over-coming your cost basis. That's the downside to a strangle. And don't forget, that there are many more instruments out there than what I mention in this blog entry. For example, DOW Futures 4,500 Puts are going for $175. As with the Gold Calls, the option loses value as time passes.

If you want more information regarding the components of price when it comes to options? Here is a playlist that discusses options, and what makes up the price, and what you have to be aware of.

Just be aware of your cost basis for crying out loud. That's money management 101. It's determining, and controlling your risk.

Edit: Oh, and I want to thank Derek (Ohio1998) for pointing out the FAZ to me. I was originally looking at the SDS, but he's the one that pointed me in the direction of the FAZ. As a triple, it'll take a bit more timing, but I think, is a better tool to use than the SDS.

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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.

Friday, June 19, 2009

What would put Dan in the Hyper-Inflation Camp? (VIDEO)

"Inflation is dead for a generation. That means 25 years" - Matt "Mr. Fed" (Crashof2008)

Hyper-inflation! Get out of US Dollars! Get into Gold! Inflation is coming! Inflation is coming!

People know that I sort of scoff at that concept. But on the other hand? Many people hear: Hyper-deflation! Get into the US Dollar! Get out of Gold! Hyper deflation is coming!

Who are you to believe? What's going on? Can you protect yourself both ways?

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



And there is more to the list than what I mentioned in the above video. For example, if they start mailing out $6,000.00 checks to everyone (Despite the fact that the United States government has just about run out of the ability to spend money, thanks to the bonds)? Then yeah, I'd switch to an inflationary camp.

How likely is that to happen? Seriously?

Remember, credit bubbles have occurred before in history, default crises have occured, and the currency didn't collapse.

Tomorrow, at the "Week in Review" podcast, I will talk about an "economic strangle" strategy that I thought of ...

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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.

Thursday, June 18, 2009

Investment Series: Buy and Hold is Not Dead (VIDEO)

"Fortunes are made, and disappear, over the lifetime of a single generation. Today, a person in essence takes his wealth from society just for the duration of his or her lifetime. The next generation has to create it anew." - Mikhail Khodorkovsky

This video is part of a series. The introduction to this series, can be found by clicking here.

The market is down! The market is down! Buy and Hold is dead! Buy and hold is dead! Warren Buffett is a hack! I've heard statements like this, and others since this bear market started (which so many of us knew was coming). But does this mean that Buy and Hold is dead?

Let's talk about that ...

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



The next entry in this series, I will reference an older post from some months back that discusses the kernel, or foundation, of my investing approach.

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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.

Wednesday, June 17, 2009

Challenge Project Movements:

So I have a record of it, and for those that didn't catch my Twitter update, I wanted to let everyone know that I've put a stop / loss order in for all BAC investments, in all of my accounts, at $12.20 GTC (Good until Cancelled - 60 days). So that includes the Challenge Project. It'll free up more cash for myself, and at the same time, frees up the amount of cash available in every investing account I have to hedge with the SDS on.

But the SDS is only that. A hedge position, because if the market pulls down here because of the real mover and shaker (the credit markets), I expect it will be a very, very ugly time for the stock market.

So the orders are in and working. I also wouldn't be surprised to see me move a bit of cash from the savings account to the investing account, to increase the size of my hedge with the investing account.

I know I said that I would never sell my BAC stock until zero? But guys, what's going on in the credit markets really, really has me freaked out.

Edit: Sold out of everything at $12.20. -$144.60 on a stock who had all but destroyed their dividends. The Challenge Investing Account now has $124.60 in cash. More can be moved in from a slush fund maneouver.

Further Edit: Just transferred $39.06 from the Challenge Project Savings, to the Investment Account, leaving the Challenge Investment Account at $163.66 of cash besides the shares of KO and JNJ, and $25.00 in the Challenge Savings Account

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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.

Introduction to the Investment Series (VIDEO)

"An investment in knowledge always pays the best interest." - Benjamin Franklin

Some time ago I made a series of videos that I called the "Investment Series". A few of those videos had some issues with the video and audio quality. So I am going to remake those videos, and clear up some other issues regarding the music used therein.

This video is the first in that series, and is an introduction to investing, as opposed to trading. I thought given the extreme trading environment that we find ourselves in? It was time to discuss investing.

I'm such a contrarian. :)

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



Here is the link that I mentioned in the above video, where Rbreb13 had a fantastic DRIP investment with GIS

The next entry in this series will examine the concept, which is often touted by traders, that "Buy and Hold is Dead"

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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.

Tuesday, June 16, 2009

Money Management: For Investing (VIDEO)

"Investors have very short memories." - Roman Abramovich

For some time, I've talked about money management, and how money management principles apply to trading. That is because, at the time of this writing, we are within an extreme trading environment.

But money management principles also apply to investing, which I discuss in the following video ...

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



So do some research on diversifying into different market sectors. Diversifying into different types of investments.

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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.

Saturday, June 13, 2009

Week In Review: Report from Michigan (PODCAST)

"Many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was not part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it." - Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Book IV

Each week, I have a "Week in Review" I discuss the previous week in regards many of the capital markets according to their kind, and the economy as a whole.

After a review of the markets, I would like to give you an economic report, the 'facts on the ground' as it were, from Michigan ...

(Podcast Included. If you're seeing this entry elsewhere and cannot play the podcast? Click this link to go to the exact podcast entry ...)



Click here to download this podcast.

Here's a picture of the type of dog that the wife and I are looking at purchasing. A Brindled English Bull Terrier:



Here is that video that I mentioned in the above podcast ...



Learn to become a little more self-sufficient. Who knows? As Adam Smith stated in book IV? That may end up helping the economy overall.

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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.

Thursday, June 11, 2009

Challenge Project Trade: Live Cattle

For those watching the Twitter updates, I put in an order to buy one Live Cattle 90 Call Option, August, which has a theta or time expiry of 57 days, for .200 limit day order (in other words, if I don't get it for $80, then I don't get filled today)

We'll see. This is a tricky one, as it's pit traded. Regardless, this will be a swing trade for the Challenge Project. If filled, I would go ahead and put in my profit target GTC (Good until Cancelled) order to take profits at .70 or $280.00

Edit: Filled at .200 or $80.00 for the August 90 Call. As this is an option, my total risk for the Live Cattle market cannot exceed $80.00. Seasonally strong period will begin in the next few days. We were at 90 (the strike price) not too long ago.

Now I'll be putting in an order to sell 1 August 90 Call Option at .70 ($280) or better, or .700 limit, which will in essence, be my profit stop.

It settled today at .250, or $100.00

Wednesday, June 10, 2009

Cha-cha Chain-ges ... (VIDEO)

"Brett ... It's 1986 David Bowie from the movie, Labyrinth" - Flight of the Conchords

Backtesting is using computer models to determine whether a given trading strategy has merit. You run a given set of parameters against historical market data. The computer backtesting model will give you an automatic result as to how well the strategy would have worked in the past.

So what about backtesting a trading strategy? Does it have any worth? How do you backtest a strategy?

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



In addition to what I mention in the above vlog, you have to remember that when you backtest? You may be running the data through a historic period of the market, where that strategy would have worked well.

But as I often tell folks? The 'environment' that you can find yourself in often changes. For example, in 2004, we were in an investing environment. Right now, we're in a trading environment. That may last some time. We could then enter an 'investing' environment once again.

If you backtest data through one 'type' of environment, it may provide fantastic results. So what if you backtested your strategy during a time period that was an 'investing environment', but try to use it on the current 'trading environment'. Do you see how the results could become skewed? You'd be using something that worked well in an investing environment from years ago, within a current trading environment.

Now ... if you haven't seen them yet? Well, for your comedic entertainment ... I present "Flight of the Conchords" ...

For married couples ...



If you are married? That's just funny. I don't care who ya are, that's just funny :)

The last skit from the David Bowie Series ...



I guess you have to have a really sick sense of humor to love this stuff. Personally? I'm laughing every time I see it.

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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.

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.

Sunday, June 7, 2009

Week In Review: Weigh your Options, Make a Decision, Control your Risk (PODCAST)

"Each indecision brings its own delays and days are lost lamenting over lost days... What you can do or think you can do, begin it. For boldness has magic, power, and genius in it." - Johann Wolfgang von Goethe

Welcome to the "Week in Review"!

Last week, we discussed the Credit Markets, Bond Curves, Central Banking, and the implications therein.

Bonds continue to fall, which means that rates continue to rise. Now, the U.S. Dollar has fallen pretty far correct? I discuss that fall ... and more importantly ... specific options for everyone, traders and non-traders alike who are concerned about that fall, and what I see economically, in this "Week in Review" ...

(Podcast Included. If you're seeing this entry elsewhere and cannot play the podcast? Click this link to go to the exact podcast entry ...)



Click here to download this podcast.

Personally, I don't think it's a good time to buy the metals. They're pretty expensive at the moment. But then again, I can react to changes in value much more quickly than folks who are not traders. But if you want to buy just a little bit? I use the Northwest Territorial Mint to purchase my silver bullion.

Edit: One point of clarification. When I mentioned the Bond Curve (Which is Federal), I jumped a little too quickly to talking about state budget problems, without a key piece of information. What I had been thinking of, was a discussion we had in the Ventrilo Market Buzz Server about the muni-bonds, and their relation. Not all states and cities operate in this manner. But enough of the "Big GDP" states do, so that there is a relation between the muni-bonds of those states very key cities (which I think someone would have to be insane to get near muni-bonds right now) and the long end of the Bond Curve, which affects the Federal level. As I discuss the credit markets, remember ... there are four distinct areas of the credit markets, which are, and are not related on some levels (Government, Corporate, Fixed Income, Municipal Bond) But enough key cities do operate in conjunction with the credit markets, that it does end up affecting the entire state. I jumped a little too quickly, and my speech wasn't following my thought pattern. Sorry about that. I'll try to be a little more specific in the future.

Thanks to Matt for pointing out that point.

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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.

Thursday, June 4, 2009

Airelon's Investing and Trading Thoughts: June 2009 (Hunker Down) (VIDEO)

Challenge Project Accounts:

Investing Account Balance: $499.13
Stock / Futures Trading Balance: $1,522.92
Online Savings Balance: $64.06

Here it is. My "outlook" vlog entry for the month.

Near the beginning of every month, I have an "outlook" entry in which I discuss what I have my eye on for the upcoming month. I said it back in January, February and April. Stagflation. So here are my thoughts, as they stand today ...

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



Here's the Remington STS 12 Guage that I'm looking at.

How do you like this little article that Derek shared with me today? My two favorites were:

"Rattner is demanding the bankruptcy court simply wipe away the money GM owes workers for their retirement health insurance."

" ... grab the pension funds to pay off Morgan and Citi."

Can you even believe it? Can you even wrap your mind around that? I had told Derek earlier:

This is why people think that I'm an individualist (I'm not actually). When people ask if I am looking for my DRIP portfolio to be my retirement, or what are my retirement plans, my answer is always the same. My retirement plans are about $10,000,000 US at that time's value adjusted for inflation, in liquid assets.

They usually laugh, and say: "No, really, what are your plans?"

They don't understand I'm not kidding. I am not depending on any stock, company, government, dividend, health care insurance pension fund ... jack diddly. My retirement plan is what I can accumulate between now and 65. And I'll probably never retire. I can't imagine not doing what I do for a living. I grow my food, shoot my meat, and accumulate assets that I think will hold their value and increase.

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Challenge Project Accounts:

Investing Account Balance: $499.13
Stock / Futures Trading Balance: $1,522.92
Online Savings Balance: $64.06


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.

Tuesday, June 2, 2009

Outline for the Challenge Projects Strategy

"It's not the plan that is important, it's the planning." - Dr Graeme Edwards

I've received many, many questions regarding the Challenge Project.

Which is great! That's what I'm here for! The low funded, as well as for folks who got themselves in the same position I got myself in from 1996 to 2000. Which is when I was repeatedly blowing up my account.

Most of those questions revolve around the strategy that I have for the low funded challenge project, moving forward. What are my plans? Do I plan on touching the investment account again? What about the slush fund? How will that work?

Well, here's the strategy for each account moving forward. The Trading Account, the Investing Account, and the Savings Account.

(Click to Enlarge)
(Right Click and Open in New Window
or Tab To Keep Viewing)


Of course, we are in stage one at the current time. What I call the "really tiny" account phase. We can have 1 loss, both in terms of the drawdown kill switch, and in terms of risk tolerance until we wait for the infusion of new capital. In a few months, we'll be moving to phase to, or what I call the "smaller" account phase.

But notice, later on, that the Drawdown Kill Switch becomes equal to what I have in the Savings Account for the slush fund. This means that a) I always have money in my savings account, earning interest, b) money ready to go in case that drawdown kill switch is hit.

Now, let's move to the Investment Account.

(Click to Enlarge)
(Right Click and Open in New Window
or Tab To Keep Viewing)

At the current time, I do not see us within an investing environment. That can change. I always tell people that in 2004, I was investing 60% of my money, and trading perhaps 30% of my money, and saving 10% of my money.

Right now? I'm trading all of my money. I don't like investing much, in an environment where companies are legally permitted to "cook the books" with "mark to 'model'" accounting. But I continue to hold on to my DRIP dividend portfolio. I was telling the guys in the Ventrilo Market Buzz server yesterday that years ago ... come November and December? I used to buy investment stocks like they were going out of style. Basically, until I was out of cash.

Last November, I think I bought one stock.

But that can change. And if I see a deal, say on a stock like PG, or GIS, then I will add it to the Challenge Project Investment Account. Or I may add more weight to KO or JNJ. BAC I'm dumping as soon as it's profitable.

Now let's move to the Savings Account.


(Click to Enlarge)
(Right Click and Open in New Window

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So, we see for the Savings Account, that I view the account balance in three parts. What I use for a) emergencies (which I give prime importance to), what I use for the b) slush fund for either the trading account, or the investing account, and what I use for c) a base savings.

As they grow, each account will feed the other accounts, depending on performance.

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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.

Monday, June 1, 2009

Getting out of Debt is the Same as Making Money (VIDEO)

"Debt is the slavery of the free" - Publilius Syrus, Roman Author, 1st century B.C.E.

I said it months and months ago. Debt Free is the new sexy. Both for your own personal finances, and when looking for companies to both trade and invest with.

Do you want an automatic 18% return on your money? Pay off your credit cards.

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


Wings in 5.

Tomorrow, I'm going to talk about the entire outlay for the Challenge Project, for each account. The trading account, the investing account, and the savings account.

* * *

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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