Advantages of Large Cap Stocks for Trading
When I first mentioned my plan to colleagues, about trading large cap stocks for huge profits. They all, without exception, gave me that questioning but polite look of 'yeah, whatever.' Two years later, after paper trading my ideas, and documenting my fictional account. A few eyebrows were raised. This year I began in earnest to trade with actual dollars, I e-mailed my circle of fellow investors, before each trade and at its completion. Now I have a following.
But way back when, in the beginning, I had to explain over and over why large caps? They don't move, they are predictable as hell, and there are rarely any surprises, either positive or negative. When offered these criticisms, I smiled and said precisely.
See, I had been through the nineties. Oh, I had been through the nineties, the hell of high techs, biotech's, dot coms. Up 10%, down 15%, in one week. A fortune wiped out on a rumor, a rumor I never got in time. Logical short positions would run up on a rumor, a rumor I never got in time. A nice stock pattern, suddenly bludgeoned by sheer speculative fever, that would get out of control. Until I even believed and jumped on board, precisely when everyone else seemingly was jumping off. Even now I can feel my stomach churning just writing about it.
And broke I went. However, right before the year 2000, I went cautious, not because I believed in the Y2K thing, but because everyone else seemed to worry about it. And if there is one thing Wall Street does better than old Mom is worry. So I bought GE, and sold it for about a 2% profit, over and over I did this, and made about 7% trading a nice little predictable pattern GE had established.
Well, I thought, after Y2K was over, enough of that. And back to the ulcer burning excitement of the high techs. Until I was broke and divorced and depressed.
But from the ashes of that meltdown, I remembered my GE experience. And began pouring over charts of large caps. Much easier with the help of the internet than in 1990, I studied, and
watched closely. And learned the nuances of the Dow, and the large caps. As a matter of fact they didn't move very often outside of the Bollinger Bands, even when earnings were below expectations they didn't get hammered by 20%, in fact they usually recovered what they lost within two months. And they were predictable. They also had what many high techs didn't have, value, worth, assets, and actual earnings. They also paid dividends, which meant they actually had some dough to spare. All this meant that people were not going to abandon them like the Titanic, these were good places to speculate. It was like walking through Disneyland not a mine field.
I liked that, all of that. While going through my expensive divorce, and losing everything I held dear, I kept on learning. 2003 and 2004 I paper traded. I did well. Over 50% per year. I did the GE thing over and over, taking my 2%, my 3% sometimes my 8% or 9%. And moved on, finding longs, finding shorts, rolling with the market, taking what it would give me. Until finally I was divorced, and I had three thousand dollars to invest, to trade. I was back in the game.
I bought All-State, ticker symbol ALL on 4/14/05, and sold 39 days later for a 3% pre-commission profit. I was back, earlier I had started a small side business that after six months, was showing $2,000/month profit. I poured it into my investment plan, and began the e-mail notifications of my trades. Friends took interest, they told other friends, and finally I began my blog.
There it is for the whole world to see. Real time trading, by the seat of my pants, do what I do, don't do I what I do, the choice is yours. But I urge you in this and future articles to give large caps a thorough look. For solid good old fashioned investing there is nothing else like them.
About the Author
CT Larsen has been trading stocks since 1990. Now trading large cap stocks, you may follow his actual trade at http://livingonlargecaps.blogspot.com.
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