Another WSJ writer/trader whose going to lose a lot of money before this year is over. Below is his strategy for buying/selling and it’s absolutely horrid. Anybody who bought Google months ago and is still holding it doesn’t have proper money management skills.
It’s investors like this who will throw in the towel this year when the market really collapses, fueling the next wave down. By my count his portfolio must be heavily underwater and days like today really have to hurt. This is why I preach heading to the sidelines in uncertain times if your system isn’t working for you. Having a clear mind is essential to trading and constantly seeing a portfolio full of red is very distracting.
When bad times get worse, it’s best to stick to a system
I follow a disciplined system of buying stocks whenever the Nasdaq Composite drops 10% (buying lower) and selling on rises of 25% (selling higher). In recent low-volatility years there have typically been one or two of these occasions annually, and the system has worked well.
In 2008, there were multiple drops of 10% in the Nasdaq without any intervening 25% rallies. The first was in January followed by a dizzying rush of further drops this fall. I signaled each of these in my weekly columns, and steadfastly followed my system by buying more on five occasions. Fortunately I had built up some cash from the sale of my oil and commodity positions as well as savings.
