Hints on short-term investing

 

            Points from short-term gurus

 

·        Develop a trading system that fits your personality, your skill and your timing available for trading. A beginner’s trading system is different from a skilled trader’s system.

·        Start with two or three technical indicators and learn thoroughly how to use them. Short-term trading should emphasize on price movements more than fundamentals.

·        Even with a win-loss ratio of 50%, you still can make a lot of money by protecting your portfolio with stop loss and your profits with trailing stops. Define and enforce your exit strategy.

·        Knowledge is everything, and hence learn from the best traders. There are schools (some on-line) teaching folks how to trade. It is less expensive than paying your tuition via actual trading. This book and most other books are a good start and most cost effective.

·        Beginners cannot beat professionals without luck. You do not gain knowledge by paper trading. Start small. Never risk the money you cannot afford to lose.

·        Need basic capital for trading and a laptop to start. Plus living expenses for a few months if you trade full time. Prepare your new venture psychologically. Be emotionally detached in investing. Silence is golden, the rule I just violated. Your friends will not share their wins but blames, and it affects your ego and your trading.

I know many made so much in 2000 and in early 2021 that they quitted their day jobs, and then they found out they had big losses later.

·         Diversify but not over-diversify. Most of us can handle about three trades simultaneously, or more if your holding period is longer than a day.

·         When the number of new heights exceeds the new lows by a large margin (determine it yourself as all markets are different), consider sell (the market could be peaking). Sell short vice versa.

·        When you have three unsuccessful trades in a row, it is time to take a break and/or switch to paper trading. Better double your bet on winning stocks, and not the other way round.

·        Record all your trades and the results in a trade journal. Review it and learn from your successes and losses periodically.

Modify your trade system according to your gained knowledge and the market trend. Test it out with no or minimum money until you are comfortable.

Natinal debt, inflation and USD

National debt and USD

 

If you believe we should receive more free money from the government during this pandemic, think again. It is the tool that has been used by our government to buy votes for decades, as well as many foreign governments today.

 

Our government prints more money to buy our national debts. We have printed 20% of USD in 2020. As of 3/7/2021, the Senate passed the bill to print another 1.9 T (many zeroes after $1). Do the individuals making $75,000 need the aid? Obviously it is used to buy future votes. That is why our national debt has been sky rocketed. The poor should be helped for sure. However, the wealth of the rich has been increased substantially due to the rise of the stock market. It also reflects that we have plenty of free cash that are being invested in the stock market. It is a very unhealthy sign that the market rises while the economy is falling.

 

It is the same as in 2009. However, the economy did pick up and the debts were quite manageable. This time could be very different. Our children and grandchildren have to pay for the debts. When we have to service the debts, we will not be competitive in global markets. It is easy to pass the blame to China.

 

This is NOT the major problem. The major problem is the confidence of our USD as a reserve currency is shaken. The “supply and demand” rule works again. When we have too many USD circulating, we should have inflation.  When one USD can buy only half a loaf of bread and previously we could buy the full loaf, we are in trouble. Foreigners would dump the reserve USD that are used for trading and our treasury bills they own. With today’s internet and financial systems, it could happen in a day or even less.

 

USD is not backed up with gold today. Most likely, there will be new USD issued to replace the old one with one-to-ten, and then even higher. But, it is not helping us.

 

In the 50s, the British pound was replaced by USD as the reserve currency after WW2 and at that time many British colonies became independent.

 

Today, USD has been challenged. We gave Iran a tough time for not using USD in trading oil. So are Russia and China. I sincerely hope the USD would not be weak or valueless in my lifetime. I can tell inflation has come. When all the foreign central banks dump the USD, the market would drop and the long-term depression would begin. We do have inflation unless you trust our government CPI, which is adjusted to what the politicians want.

 

Links: Fiat currency: https://www.youtube.com/watch?v=bgPDW0ZpgJU

Gold: https://www.youtube.com/watch?v=pNIE7qUePq8&t=649s

Bond crash: https://www.youtube.com/watch?v=LPFfq_YWwd0