David Fuller's view -
How very prescient you were about biotechs! On the 13th March [Email of the day 4] you wrote about looking out for an upside tail on the weekly chart, and said "You could ride out the next mean reversion as a long-term investor but do not be surprised if it comes back to 100."
And what happened? The very next week there was an upside tail. That top was subsequently taken out, but now we ARE below 100! Which indeed is much lower than I expected at the time.
I took the first course, riding out the mean reversion (and more) and am now holding on. Trusting that your long-term assessment - "I do not doubt for a second that bioTechnology has a terrific long-term future" - is as correct as your short-term one was! In my decision to do this I was definitely influenced by the knowledge that that is what you habitually do with your long-term positions, even in critical situations like 2008, and that it has paid off for you in the long term. And that in my own trading I have always - through decades - made money on shares and lost on the trading. So now I have only long-term positions, finally having seen the light.
Once again thanks to you and Eoin for being such marvellous guides to this choppy universe.
Thank you for your kind words and for raising, once again, such an interesting topic. You are playing to your strengths, which makes sense for every investor.
Leveraged trading is exhilarating when successful but also traumatic when it goes wrong, as it inevitably does from time to time. It is also much more difficult than unleveraged investing, because 10 to 1 gearing clearly involves short-term money control challenges. Therefore sensible people either keep leveraged trades very small relative to their capital, or build-up positions on a Baby Steps basis, protected with in-the-money trailing stops. However, this latter tactic needs the luck of significant and orderly trends to be profitable. They are often the exception rather than the rule, so disciplined traders will often find that they are frequently stopped out with small profits or losses, even if they have anticipated the overall direction of the trend.
As for riding out your unleveraged FTB position, it is near $100 today but it briefly fell much lower on the August 24th temporary meltdown, probably due to high-frequency trading, although I have no confirmation of this having been on holiday at the time. I hope you were similarly distracted from the markets on that day, because it would have been traumatic for many people. For this reason I am repeating the tactical paragraph from my reply to your email posted on 13th March, for dealing with positions where the trend has accelerated in your favour:
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