Here is a brief summary of my trading style:
1) I do not average down
2) I DO NOT average down
3) I DO NOT AVERAGE DOWN
I know some of you do average down and all I can say is “Good Luck” to you. Here is my past post on averaging down.
Another thing I don’t like is leverage. I do not load up on leverage and I’ve done pretty well without using leverage.
So how do you make big buck if you don’t average down or leverage up? Well, I tend to load up high beta stock (high risk with high reward). Thus, in lieu of leverage, I like to pick stock that has the potential to be a 2x to 5x bagger. But the catch is that if these stocks don’t do what it supposes to do, you can lose half of your capital you put in these stocks pretty quick.
On the other hand, I will NOT get a margin call because my pick does not work out. Also, I always sleep easily because I do not go “ALL IN” in any one of my high beta stock. 20% of my cash portfolio is pretty much as high as I will go in any one stock.
For now, my cash portfolio has 3 high beta stocks: AMRN, USU, and LRAD and they occupy 34% of my portfolio.
Currently, all three are going through drawdown which I am prepared for. Meanwhile, my gain on trading activities (mainly DDD & RIMM) have helped offset some of the drawdown.
I traded LRAD from the time when it was under the symbol ATCO. I bought ATCO in 1999 at $7 and sold at $11 in early 2000. I missed the 2005 rally because I was not looking at ATCO then. Then I bought a boat load of LRAD (ATCO changed their symbol to LRAD to represent their main product line more accurately) when it was trading at 50 cents due to the 2008 meltdown. Because I bought a boat load, I also received plenty of bonus shares of PAMT from the spin-off. For every 2 shares of LRAD, I received one share of PAMT. Afterward, I added to my PAMT position until it did a reverse-split from around 80 cent into $4. After some marketing push, PAMT rallied to $11. However, I sold all my PAMT at $9 before it got to $11. I’ve no problem taking profit before it reached the top because at the time, the volume was there at $9 for me to unload.
I also unloaded all my LRAD shares when it rallied to over $3 in 2011; however, I sold all my LRAD shares around $2.50 before it got to $3. It was in 2012 that I started to buy back some LRAD shares for another rally in the future.
There were other baggers I caught in the past but the point I’m trying to make here is that you don’t need to leverage to the hilt to push your luck, you just need to find the right high beta stock to hit your homerun. The only catch to this strategy is that you need to have patience. Yes, a lot of patience to wait it out is required.
Currently, I’m waiting for AMRN to give me at least a 2 baggers (knock on wood).
USU, on the other hand, can be a surprise here. The way I see this, USU will instantly become a $2 billion dollar company if they get the Gov’t loan guarantee. This can be a prospective 10 baggers. I loaded up USU the way I loaded up LRAD when it was trading at 50 cents back in 2008. The risk here is that the US Gov’t decides to let their only uranium enrichment facility to go under. What is the odd of that happening? The risk/reward in this one is tremendous based on my humble opinion.
In summary, my strategy is actually quite simple. I’ve loaded up on three potential runners; and then I spend the rest of my times finding swing trades to keep myself busy. If you looked at my November trading journals, I did quite well on RIMM.