Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Ten Ways to Escape Trading Constraints


Find a competent money manager or try these methods on your own.

Minyan Frank writes:
"I work at a financial firm that has a multi-week holding period requirement. The only risk management allowed is the ability to employ a fixed-percent stop loss below one's purchase price. It cannot become a trailing stop or moved until the holding period passes. Under no circumstances can a stock be sold for a profit before the holding period is over.

"Considering the volatility over the last year, it's been difficult to do much with these constraints, as I feel that it throws off the any favorable risk/reward scenarios that I find.

"If you had these limitations, how would you approach trading your personal account?"
This is a very interesting question. Since you work under strict constraints, one serious consideration could be to find a professional money manager whose style is consistent with your approach to the markets. Also, you should seek advice from a competent registered financial planner/advisor.

However, if one had to manage those funds personally, here's how I'd approach the situation.

1. Small positions in the best technical set ups.

2. No counter-trend trades, since the real trend might resume before the restrictive time-period is up.

3. No illiquid, small stocks since they might touch new highs and drop back to lows before the holding period is up.

4. Wait for sector confirmations before buying individual names.

5. Buy only buy the strongest names in the sector.

6. Don't buy names whose earnings are expected in the next few days, in order to minimize earnings risk.

7. Pay close attention to being adequately diversified; I wouldn't want any one sector to unfavorably impact the portfolio.

8. Don't short much (again, this runs the risk of being right and then wrong within the 30-day period) and instead, employ "long-cash" versus the popular long-short strategy.

9. Still pay attention to short patterns as a way of learning "what not to go long."

Investigate options strategies that can be employed to optimize profits, given your constraints.

And of course, one effective strategy might be to pray the stock does well after each position is initiated (smile).
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos