The Trader's Edge

A new methodology for hedging against after-hours volatility.

The current high level of Stock Market Volatility is such that the risk from holding positions overnight is higher than many traders can tolerate. Evidence for this can be seen in the increase in intra-day trading. The good news is that day trading has become more profitable for those who can devote full time to watching their positions on a tic by tic basis. However, this level of intensity is not for everyone and many traders still prefer to hold positions longer. Fortunately, proven techniques are available to manage risk. Large portfolio managers have employed these successfully for years but many non-professional investors are unfamiliar with them. Furthermore, techniques that have worked for large portfolios, held over much longer periods, need to be modified to reflect the higher volatility of small portfolios and the shorter duration required for the hedge. Read more…

Many investors have lost confidence in the time honored “Buy and Hold” strategy.  Some have given up on the market entirely but others are venturing into more active trading.  Given the horrendous experience of the past eight years, they feel safer on their own that placing their fortunes in the hands of others who have historically never been able to beat the major market indexes.  Those with the time and inclination are doing their own research and deciding on the level of risk they can live with. Many are learning about the advantages of  short term trading.  However, this is not a panacea.  It requires hard work and the skills of small business ownership.  Read more…