achieved by professionals. But there are certain things you can and
cannot do if you can't watch the market all day. But first things
first:
What is a zoomer?
A zoomer is a rapidly advancing small cap stock with outstanding
fundamentals that can advance 20, 30, 50% or more in a matter of weeks
or months.
Asset allocation
As the bear market has shown, conservative asset allocation and broad
diversification won't save your portfolio from a devastating 50, 60,
or even 70% loss. The key to proper protection is spreading your money
across diverse asset classes with limited correlation. But in an
increasingly global world, almost all asset classes move together,
leaving the investor with few options. Most brokers and advisors put
an investor in assets of a similar risk class based on his or her risk
profile. If an investor defines himself as conservative, that usually
means a garden variety of large caps and intermediate term government
bonds.
Try this instead: Allocate 25% of your portfolio to zoomers while
keeping the rest in CDs. This way your maximum loss is 25%. But you
needn't wait for your zoomers to go all the way down to zero. If you
buy right and limit your losses to 10% per position, your downside is
considerably less. On the other hand, if your zoomers double in a
year, your overall portfolio return is a respectable 25%, plus
interest. And you achieve that by only risking 25% of your money, not
all 100%. How's that for risk management?
As your success and confidence increase over time, you can allocate a
larger portion of your portfolio to zoomers.
Rules of engagement
1) Limit your purchases to stocks priced $15.00 and above, with a
market cap of at least $500M, trading at least 200K shares daily.
The lower the price and daily volume, the greater the fluctuation. Any
stock can move a buck a day. But a $1 move is 20% for a $5.00 stock
and only 3.3% for a $30.00 one. True, you won't get rich quick, but
you won't go broke either. You can produce some serious returns by
compiling a series of 20, 10 or even 5% gains.
2) Higher priced larger cap zoomers move in more predictable patterns.
Once a breakout is out of the gate, you can protect your gains with a
series of laddered logical stops. BUT:
3) Do not place stops for stocks under $15.00 trading less than 200K
shares a day. You can (and should) have mental stops in place for
lower priced zoomers, but if you actually place them, chances are you
will get stopped out in a market maker / specialist raid to clear all
the stops, only to watch your zoomer power higher in disbelief. This
kind of manipulation is more rare with higher priced, more liquid
stocks.
4) If you feel strongly about a low-priced zoomer and don't want to
miss out on the action, buy a small " don'tt care" amount early
on and sit tight. This way if the zoomer flops, your dollar loss is
small. If it runs, you get all the appreciation.
5) Keep your position size constant. With a $100K portfolio and 25%
allocation to zoomers, you can carry, say, 5 positions ($5,000 each).
6) Don't overtrade. Let your zoomers accomplish what they set out to.
Large gains do not come in a day, nor do big losses. You can always
sell after one really bad day in the market. But if you don't panic
and sit tight, you can produce some serious gains without having to
constantly watch your positions.
7) The best time to buy a zoomer is when it first breaks out of a base
- not when you are in the mood or have some cash to burn. The market
usually presents 3-5 really great buying opportunities per year. There
is nothing wrong with sitting in cash waiting for the right moment to
pounce.
8) Don't get married to your zoomers. Every new leg up is powered by a
new crop of zoomers. If you hold on to them for too long, you risk
turning your portfolio into a vintage collection of former leaders
going nowhere.
The bottom line
By following this simple strategy, you reduce your overall portfolio
risk, maximize your returns, eliminate overtrading, and sleep well at
night.
Making Money In Stock Trends: http://www.trdeshadow.tk/
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All Forex Systems visit at :
http://all-forex-systems.blogspot.com
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