Been creating a short-term trading strategy. Obviously this is outside the norm of the patient buy-and-hold investor, but in thinking of the professional, it could yield consistent cash flows if seeking to add such a strategy to one’s investment toolkit and round out skillsets. Have notes specific to 2-3 companies for it, will report back if I execute on it in any sustained way.

Overarching Thesis:

Company is quality and innovating strongly, so investment is positive generally.

Buy in a good market on red days, especially outsize reds to make a profit on the rebound. The investor would mitigate out a major outsize down move because of buying immediately after the move, with a 1-3 day investment horizon to allow for a pop. The investor can then cement an even more cost advantageous position by doubling if further down moves, or, if it moves up, already in the money on at least 50% of max size. This would then be used consistently (day in and day out) to build a larger cash position.

Rules:

1. Buy only on red (down) days of 4.5% or greater
2. Sell on the rebound green day 1-3 days following event.
3. Keep daily ledger of news related to the stock.

Risk Management (Control variables)

1. Target hold 1-3 days (see #2 above)
2. Trade this strategy only in this market with this thesis – separate thesis for each company
3. Stop loss 4%
4. Buy only on red days
5. Only one portfolio with a specific number of shares for one company, repeated
6. Entry/Exit – enter half position, then remaining half.[1] Exit [down 4%] [1/2 up 4%] [remainder up 10%+] [3-day hold][Friday closeout] – mitigates holding risk
7. 1 trade daily, depending on liquidity

Research:

• Connections to commodity markets
• Pricing bands
• Debt Market for the company
• Options market
• 10k/statistics/fundamentals
• Relative to S&P and competition

Capital allocation strategy: measure profit weekly, sell out of all positions Friday afternoon regardless of Profit/Loss. Taking profits: 50% tax reserve, 25% cash savings, 25% reserve to increase position size.

Cherry pick any and all ideas, leave the rest.

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[1] This could be done to 1/ad infinitum, but why quibble over fourths and twelfths?