Tuesday, April 10, 2007

"Gambling" Episode 1

gambling sounds so harsh...."speculating" seems more flattering....but maybe not as accurate.

A proper speculation would utilize a SMALL amount of our available risk capital, and attempt to achieve a healthy gain for the overall portfolio while only having a small amount at risk. However, given our criteria -- tripling our capital before my lease runs out -- i'm not sure that will get me the outsized gains i'm looking for. i'll likely have all of my money at risk large portions of the time until i hit my target or go bust.

So, below I'm going to attempt to outline some thoughts that are driving my gambling decisions:

1.) leverage

anyone who bought a house with credit knows what this is. to get the kind of gains i need, i'll probably need to use leverage. either margin (borrowing money) or derivatives, or both. if/when the time comes i'll explain how and why. both of these options have a cost over and above cash trading in an underlying security however. and, as any f'ed borrower underwater on his/her mortgage can tell you, leverage works both ways. :)

2.) focus

it could be argued this is just another way to say leverage, but i'll probably try to put all my eggs in one basket and watch it very closely, rather than "deworsify". actually, most of what i'll be doing is watching price and volume and attempting to discern something out of that. this will be hard to do because i've spent a long time patiently trading fundamentals. however, in this case, that will not work because the market can stay "irrational" way longer than the length of my current lease.

3.) trend following

going with the flow. forget my prejudices and just let the market tell me what is working and following it. for a really opinionated trader like myself this is pretty hard to do. especially when i think we are on the "cusp" of something that won't be so positive -- soon.

4.) patience

this will be the hardest to practice cuz i don't have much time. but, given that we could be on the cusp of a change in direction....if i can stay in cash long enough to spot a trend before jumping in, i could enhance my gains...in other words, i could just focus on "not losing" until it's time to move, and with a big enough, leveraged, focused bet, make all of it in a week or so.

join us next time, on, "Gambling",


Anonymous said...

You got guts!

J.P. in Ohio said...


I'm looking forward to watching this play out...

Good luck!

j.p. in ohio