Personal Economics 101

While you could be in cash 100 percent right now, you would not have any earnings on your investments. In fact, you’d be losing about 2 percent annually due to inflation. So that’s not a very good strategy. While it is probable that there will not be a recession in the next few months, if we created a strategy that assumed the worse, we might miss the opportunities for some great earnings in the meantime. So this is what I recommend as an overall strategy: Have a written investment plan that outlines your risk tolerance and how you will allocate your resources. For example, if preservation of capital is the overriding goal, go heavy on money markets and bonds. Or if your risk tolerance (or you are young), go for high-growth investments, or at least those that have the potential, such as small caps, or something along those lines. Most stock broker’s web sites will let you design your portfolio based on these factors. Schwab offers customized wizards to design a por...

Fundamentals tell you what to buy. Technicals tell you when to buy. Stick to your system of entry and stops religiously. Use stops and stick to them. When euphoria kicks in, that’s usually a local top. Much of the trading-related news & social media troll boxes are noise. Ignore them. Trades should end in 3 ways: Big Win, Small Win, Small Loss Repeat after me. “The trend is my friend.” Don’t scalp the counter-trend. Keep a trading journal. Determine flaws. Eliminate them. If you open a trade based on a high time-frame signal, don’t self-sabotage and close that trade based on a much lower time-frame signal. Good sleep, proper diet & exercise are just as important for trading as they are for most things in life. Don’t get chopped up trying to trade/scalp sideways price. Expect consolidation after large price movements, not continued volatility. All indicators are using the left side of the chart to try and predict the right side of the chart. Chart the exchange wit...

The great majority of ETFs are not designed for day-trading. I like to use them for longer-term trades (months to years), especially ones that pay monthly distributions. There are some leveraged ETFs that I’ve used for shorter term trades (hours to days). I still don’t view these as specific day trades, which I define as trades that are never held from session to session; for example, the NYSE closes at 3 pm CDT, so all positions must be closed before that time. For example, you could use SPXL and SPXS to trade the S&P 500. These ETFs are leveraged 3X the overall market. For example, if the S&P 500 increases by 1 point, SPXL should increase by 3 points. Generally, these two ETFs track the market very well. There are other leveraged ETFs for almost any asset class; for example, OILU for a bullish 3X Crude Oil trade. If I’m going to actually day-trade an asset, I’ll trade the futures market, which is highly leveraged and highly volatile. I would not suggest you trade in ...

I just spent three weeks on vacation, and drove 4,100 miles round-trip from Austin, TX to Traverse City, MI, with side trips to Ann Arbor and Petoskey. Petoskey, Michigan I drove through Texas, Oklahoma, Missouri, Illinois, Indiana and Michigan. As the trip progressed, I paid increasingly higher prices for gasoline, from about $2.15 in Texas and Oklahoma, to $2.50 in Illinois, and $2.60 to $2.75 in Michigan. There are three factors that drive the price of gasoline at the pump: The price of oil, the amount of taxes per gallon, and the distance from refineries. As you'd expect, Texas and Oklahoma have lower gas taxes (by as much as 50%) and are much closer to refineries, driving down the cost of transportation. What I find interesting -- though everyone likes to complain about the high price of gasoline at the pump -- is that gas is not that expensive, if you factor in inflation. In 1968, while I was in high school, I could buy gas for 30 cents a gallon. If you factor in ...