want a free 5000 points ... hedge

Hmmm ... this is not a new topic as I have discussed this several time in the past.

As discussed elsewhere both DOW and XJO have retreated close to 2006 lows due to financial turbulence and appears for the time being to be the new 'line in the sand'.

Also noteworthy that XJO did not fully recover from 2002 crash until Aug2004.

This post is not about trading income but for those whose stock portfolio comprises constituents from the XJO and are suffering the retreat from 2007 highs to 2006 lows. This equates to zero growth for the last 2.5 years.

Add past and future INFLATION into the equation and you would have to think that break even might not come until early 2010.

One possibility: Hit the books and burn some midnight oil and learn to trade the swings. If you become successful you will find trading your portfolio cumbersome and tax a major problemo.

Another possibility: Pro's climb the next mountain and learn to trade index derivatives ... ETO's, SPI or CFD's and HEDGE, HEDGE, HEDGE !!!

You will know you are successful because you will always be a NET BUYER adding to your stock portfolio.

Chart shows a lazy weekly system which filters out daily 'noise' (and the propensity to over-trade ...) capturing 5000+ points from the 2006 lows ... whilst the points shown are conservative one needs to scale up for tax, slippage, spreads and f-ups.

For the 2002 downturn you needed 800 points (23%) and for 2007-8 you need say 2000 points (29%) ... both of these events add to the argument that one should not simply 'buy and hold' but explore proactive ways to hedge portfolio against losses.




Cheers ... tight stops.


This is only my view ... read the black stuff.