Lesson:  If feels good to be wrong and make money

Personally, I am having my ‘worst’ trading month since March 2009 of last year.  I bring this up to share what I have learned, even just in one year.

Last week the trading started to get a bit better, with more trading opportunities, but for the majority of this month, the buy and hold, swing type strategy working well much better than the daytrading.  Overall, it’s been a frustrating month with the market basically going up every single day.  Buy and hold won this month.  That being said, I want to share with you the adaptive strategy I applied this month that helped me to make money that is not normally my style.

My style is trying to short overbought stocks in extended markets most of the time.  & this strategy always does well, overtime.   Short term there can be blips, especially when the market stays extended over a period of time like March…or some would say “melt up” to a more fair value.

In March 2009 I had a losing month, dropped about 45k sticking with trading SKF, SRS, and FAZ for a month too long.  During March, I did not adapt, figured these ETFs delivered me 500%+ returns (especially SKF) in the year prior they would always work.  So at the end of the month I reviewed the market and said if the DOW hit 7500 and stayed there I would be done with these EFTs.  It did, I flipped to more long trading and made another 200% last year.   Ok, here is the connection to this month:

In March 2010, I noticed there were not many opportunities with my bear minded view.  I just got ran over losing 7k in a low float stock called SCOK, even though it had a secondary at $6 to go off, it ran 20+ points in two days after I shorted it.  This told me two things:  One, speculation is in play, and two, when shorting, be carefull.

So this month I have shorted SOMX & ABIO, two low float speculative plays, with extra care and in not normal size due to market conditions.   These two stocks broke out massive, but losses were minimal, 2k+, with stops obeyed.  So sticking to my adaption rule this month, I love to short, but going to short carefully when doing so, and that has saved me money.

In turn, my last 4 nice size winners all LONG PENNY STOCKS.  Yep, the same PENNY PIGGIES I would like to short, or hate.  WAVE, YRCW, APCVZ & SNSS combined penny plays in the last week has netted 11k in gains, outweighing the losers.  My point here again is adaption, or switching gears a bit to make money in a market I should have lost in.

Conclusion:  Past experiences has lead me to another profitable month.  Am I happy that I missed this EASY buy, hold and walk away move this month with not much volatility?  You bet.  Adaption makes me a succesfull trader, no matter what the market conditions are.  Most bears and short traders are screaming in losses this month, but not me, I learned from last March right around this time and applied it.

JW