There is a little bit of a gambler in me so since I started trading with Robinhood a year ago, I decided to play with my funds a little and try to swing trade inverse ETFs (mostly SQQQ and SDOW).

Since I clearly have no idea what I'm doing, the rule I decided on was that these ETFs should never make up more than 1% of my total portfolio/savings.

This has largely been a failed experiment because I just don't like the anxiety of making uncertain predictions. From my experience as a "professional poker player", if you are gambling professionally, you cannot rely on your intuition. You have to have framework, strategy, and math.

Are there any analytical tools that would help a trader determine where a dip in a stock is or would help with leveraged ETFs?

  • Never. The cards are stacked against you. You are much better off gambling with poker. – gaefan Feb 15 '19 at 12:35
  • @Jeff O'Neill - For the most part, that's true but not always, depending on how you define trading. Believe it or not, there are some situations where you can trade income positions and bump your yield up 50 to 100% without adding one iota of risk. – Bob Baerker Feb 15 '19 at 13:14
  • @Jeff: being a pro poker player is mostly defined by your temperment. You have to be willing to fold practically every starting hand, and you have to be extremely focused. My temperment is very energetic and sensitive, i don't like sitting at a desk unless im playing a video game. Office jobs to me are incredibly boring and pointless. On average only %10 of texas hold em players make a profit and beat the house at the same time (the house being the little casino commission that they take from big pots). – thinksinbinary Feb 15 '19 at 17:49
  • @thinksinbinary, yes, that's why you are better off with poker! The percentage of active traders who beat the market averages is much less than 10%. For individuals like yourself, it is probably about 1%. – gaefan Feb 15 '19 at 18:25

There are many ways to trade. A simple one is to just trade off the news. Quickly identify the direction, get on for some of the ride and get off before they can take much of your gain away or if wrong, much of your principal.

More complex systems involve various technical indicators that identify very short term trends and patterns, getting on for the ride and hoping that the trend continues. It's important to note that these indicators predict nothing.

Some other examples of complex systems are trading expensive near term option volatility against cheaper further term volatility (earnings plays), delta neutral trading, and pairs trading.

To varying degrees, in all cases, there's a common theme: "framework, strategy, and math". Without them, you're just throwing it at the wall and hoping that something sticks.

I'd offer that there is much to be gained from trading small portion of your portfolio as you have been doing. Doing so and breaking even would be considered a success and the experience gained from that adventure isn't something that can be learned from a web site or a book. I'm not suggesting that this means that you have a future as a day trader. Most lose at that endeavor. If you can discard the wannabe get rich quick mentality and figure out what trading situations you can identify and master, you may be able to fnd situations that augment your gains with modest and sometimes even less risk.

As for your leveraged ETFs, they are just a vehicle that magnifies trading gains and losses.

  • "Most lose at that endeavor." This is why the distinction between investing and speculation is so important ;-). I gave up trying to trade on the news because with robinhood i realized that earnings announcements can actually drive down the value of a stock. Timing the stock market is a nightmare, but the flipside is that "risk" is something that can't really be calculated even if your talking about harm to your coporeal person. – thinksinbinary Feb 15 '19 at 17:55
  • When I say trading news such as earnings, I'm referring to taking a position right after they release it rather and in the direction of the move than anticipating what the news will be and guessing what the reaction will be. Trading in after hours is like the shoot out at the OK Corral. Volatile! Eventually, a more logical approach for me was to trade the volatility crush of near week options against a further expiration (they all contract but the near week expands and contracts more). Put the odds in your favor. Now, I have moved on the higher probability positioning - a function of age :->) – Bob Baerker Feb 15 '19 at 18:15

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.