It is time to make New Year resolutions. Mine is to do even better in the market than I did in 2013. What is yours? Would you like to do even better in the
market than you did in 2013? It will take some work but it will be worth it.
My style is to get to know a few equities really well. I study them year after year getting to know how they move throughout the year. Each year I set my
expectations for the year. Presently I feel that most of my equities will look a lot like they did in 2013, which was a lot like 2012, which was a lot like
2011, which was a lot like 2010, which was not a lot like 2009 but it did have some similarities. With options I can set up a trade that will take
advantage of my 2014 outlook. I can also pick just how right I have to be. I can pick how much I want to risk and the time frame I want to use. I can also
pick the return that I want. In some cases, the higher the return, the lower the monetary risk, but the lower the probability.
Based on my sentimental, fundamental and technical analysis, I will decide just how strongly I feel about an expected move. I’ll often use several
strategies so that I can still profit if I’m not completely right about an expectation. As an example, if I expect the SPY to be bullish into March and
finish the year up 10% or more, I’ll use trades that will work if it accomplishes that and have a high return. I’ll also use trades that will work, or at
least can be adjusted easily if the SPY drops a bit. Those trades have a lower return but a very high probability. These help me financially and
psychologically if the SPY doesn’t rise as much as I expect or even if it falls some.
I have studied how my equities moved in 2013 and how my trades did. I have also determined changes that will result in greater returns in 2014 if I am
correct.
I have a diverse bunch of equites. I have a financial, a commodity, a currency, a technology, an energy and a few others. Most of them move in a very
similar way but they are at very different price levels. I trade very different strategies on some of them. So I’m diversified in in both my trades and
equities. Some I know better than others. The ones I know best I trade aggressively. At least some think is aggressive. I consider it conservative since
the strategies have been proven to work over and over. The ones I’m not as confident with I trade with strategies that provide a large return for
very little risk.
I decide how much to risk in each by first determining how much I need to make. I then look over the equities and their corresponding strategies to see how
I can best meet that income requirement. Each year I have more money to work with so this coming year I can also do some speculative trades.
My speculative trades typically return a double in about 2 months if they work. I also do some that can result in a 10 to 1 return to risk. These trades
are not included in the trades that make up my required income. They are just extra money. As I go through the year some of my income trades will provide
greater returns than I needed and some of my speculative trades will hit it big. As that happens I’ll continue to do some speculative trades. My ultimate
goal is to have enough money to just trade really high probability trades that can be entered and left for a long time without much watching or adjusting.
This will provide a great deal of free time that I’ll gladly fill. While I truly love what I do, I would also truly love to do some other things too. Those
things will take me away from trading regularly.
Having done my “homework”, I am confident that 2014 will be a very good year. Have you done your homework? I hope so and I wish you a very good year.
Ken Bailey
OptionsANIMAL Instructor
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