On a recent quiet Tuesday in the markets, Real Money’s Tim Collins pondered his approach to trading.
“I'd label this an uninspired day,” Collins wrote recently on Real Money. “There's nothing wildly exciting on my normal watchlists. There are a few movers but nothing I want to chase or fade right now in an aggressive manner. Several of the short-squeeze plays have absolutely died. That's the risk and the challenge when trading those names … As quickly as we rose, we fell.”
One key to consider is how you do your math.
“Don't get caught up too much in percentages. Remember the moves higher come from a smaller number while the reversals are from a large number. A 100% rise only needs a 50% fall to get back to where it started.”
Another point, Collins writes, is don’t get too hung up on your current investments.
“There is nothing wrong with having conviction with your long-term holdings, but there is no upside to being stubborn with your short-term trades if they aren't working. The current environment isn't very forgiving. On the plus side, it isn't punishing being wrong too hard as long as you are willing to take loss and walk away rather than being stubborn."
He cited the example of Ashford Hospitality Trust (AHT), saying "I took a shot at [Ashford] yesterday but seeing the other action today, it won't be a name I continue to hold if it closes under $15 today. While it is acting better than most ... there isn't a whole lot of motivation tying me to this position. In short, I have no reason to be stubborn. Really, that sums up the current environment.”
