Part 7: Managing the Portfolio

Welcome back to the Rude Awakening, folks.

Today is Friday, February the 12th, 2021.

We are on day six of a 10-part series talking about how to build a trading platform that gives us an edge or an advantage.

Day one, we talked about the problem, which is we don’t have an edge or an advantage if we’re just simply buying stock or investing money directly into the marketplace.

Day two, we talked about the solution, which is building an asymmetric trading system, where we only risk a dollar for every $3 of potential profit.

Day three, we talked about how to use bracket orders to automate that process.

Day four, we talked about filtering and screening through the 14,000 different opportunities we have in the marketplace every day, how to find those trades out there.

Day five, we talked about how to calculate probability of profit and win-loss ratios and really understand whether or not we do have an edge or an advantage when we go out and place a trade.

Day 6, we talked about synthetic covered calls and how that works in our portfolio and what it does for us.

Today is Part 7: Managing the Portfolio. Click here to read today’s transcript.

Continue reading for a brief look at today’s markets…

Renewed Climb to NEW All Time Highs

Stocks are up this morning to start a shortened trading week, extending further on the gains we saw last week.

Yahoo Finance reports…

The Dow increased more than 100 points, or 0.4%. The S&P 500 and Nasdaq also advanced as both indexes added to their record highs from Friday. U.S. stocks tracked gains in European equities, after UK Prime Minister Boris Johnson said he was “hopeful” the country’s stringent lockdown restrictions could be eased in the coming weeks as the vaccine rollout continues and new daily infections fall further.

Other risk assets also performed strongly. Bitcoin prices (BTC-USD) spiked to a fresh record high of more than $50,000, extending a meteoric rally after the cryptocurrency traded around $35,000 just a month ago. U.S. crude oil (CL=F) jumped above $60 per barrel and reached the highest level since January 2020. And the CBOE Volatility Index (VIX) declined further on Tuesday, after settling below 20 for the first time since February 2020 on Friday.

Over the past couple weeks, U.S. investors have considered prospects for additional fiscal stimulus alongside much better-than-expected fourth-quarter corporate earnings results across the board. Corporate earnings are on track to grow by about 2.9%, which would mark the first year-over-year increase in profits since the final quarter of 2019, according to FactSet. And on the fiscal stimulus front, lawmakers are racing to get another stimulus package done before a mid-March lapse in federal unemployment benefits occurs after the last round of virus relief.

“Earnings season has provided proof of an earlier than expected rebound in corporate performance, and with fresh stimulus money likely to wing its way to the American population there is reason to expect further quarterly growth,” Chris Beauchamp, chief market analyst at IG Group, said in an email. “Despite all the naysayers, global stock markets, led by the U.S., continue to make headway, and seem well-set to continue doing so.”

Markets are pushing higher and higher and higher.

We KNOW a retracement MUST come.

But today is not that day.

The good news is, as long as you’re trading with a set strategy, and you’re able to cap risk and predict your probability of profit, that’s all you need to make money in any market.

Keep following along with this series if you want to learn exactly how to do this…

Have a great rest of your trading day.

See you tomorrow.


Scott Stewart

Scott Stewart
Editor, Rude Awakening

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