Jon Boorman, CMT

I am President and CEO of Broadsword Capital, LLC, a Registered Investment Adviser in Charlotte, NC.

I have spent over two decades in global markets, witnessing first-hand some of the most tumultuous periods in financial history. I have previously worked as a sales trader to hedge funds and institutions, research analyst, prop trader, and buy-side head of desk; trading equities, options, currencies, and futures.

I started the Alpha Capture blog in January 2013 to keep a record of trading signals and market commentary, and demonstrate to a wider audience what could be achieved through trend following. The primary aim has always been to inform and educate. It has been a highly rewarding experience watching this blog grow in popularity, engaging with traders and investors worldwide, and hearing how it has helped them in their trading journey.


Why ‘Alpha Capture’?

Alpha Capture is the name given to the method by which hedge funds extract value from sell-side research and broker trade ideas by tracking and measuring their performance both in absolute terms and relative to their peers.

It was first developed by hedge fund Marshall Wace in London and has subsequently been used by numerous other well-known hedge funds and third-party platform providers. As a sales-trader in 2003 shortly after its introduction, and as someone who welcomes transparency, accountability and meritocracy in the world of trading and markets, it was something I thrived at and have carried elements of it forward in my work to this day.

In his book ‘Absolute Returns‘, Alexander Ineichen quotes Ian Wace:

This business has nothing to do with positive compounding; it has to do with avoiding negative compounding… The P&L is the only moderator of hubris. You are not given money to lose it.” *

This concept of avoiding negative compounding is something that has always resonated with me.

I feel it is commensurate with the basic tenets of trend following; letting winners run, cutting losses, not attempting to pick tops or bottoms, and in the case of stocks, not trying to beat the market through relative returns, but rather trying to capture most of an uptrend, avoid most of a downtrend, and in doing so coming out ahead of the market.

Ineichen echoes this in his footnote:

* “needless to say, neither are long-only managers hired to lose money. However, the absolute return focus puts more weight on preserving wealth in difficult market conditions… Managing volatility and avoiding losses subsequently results in superior long-term absolute as well as risk-adjusted performance.”

That’s what Alpha Capture means to me and why I chose it as the name for my blog.


Managed Assets

I manage a long-only trend-following strategy on US stocks via separately managed accounts.

If you would like further information please use the following contact details. Thank you for your interest.


Subscription Services

From November 2014 all entry/exit signals and trade ideas were moved to a separately-hosted subscriber service on the Benzinga Marketfy platform. If you wish to subscribe please use the following link:-




To contact me on any other matter please use the following form:-












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  1. Alex Essaian

    Hi, I enjoy reading your blog. It would be helpful if you do a post on how to begin developing trend following system.

    1. Jon Boorman

      Thank you, that’s a good idea. In the meantime I would recommend reading any of Michael Covel’s books on the subject and visiting his site http://www.trendfollowing.com. Also for developing trading systems I recommend reading Van Tharp or attending one of his courses at http://www.iitm.com

  2. Newtopips

    I enjoy your writings. I have been trading for several years part time (full time is a s/w developer job), but I was not able to stick to a method. As you suggested to Alex, I would try to attend Van’s courses. Are there any pointers that you can give or suggestion to attend courses that helps to change one’s psychology or trading methodology.

    Thank You! for you wonderful blog.

    1. Jon Boorman

      Thank you. Reading those books or attending those courses will be a huge help I’m sure. It made me ‘unlearn’ everything I thought I knew. Your methodology should suit your timeframe and personality. Trend following is something that at its most basic level need only take a few minutes outside of market hours. I would also suggest taking a Myers-Briggs personality test to help find out more about yourself and help ascertain what trading style would suit you best.

      1. Newtopips

        Thanks! Jon. For my personality, I tried reading several books from psychology to trading methodologies, they don’t seem to work. Hence I wanted to attend few days course taught in a physical location. But Van’s location is way far away from my area (I live in Bayarea, CA). Would you know anyone who really help on this around bayarea or in CA around? I will take Myers-Briggs personality test.

        I do trend trading for forex and I had pretty good success last year. But this year it was bad as I was not clearly understood when the trend reversed 🙂 and I lost some. Main problem as with other traders, accepting the loss. And I hope with you pointers, and I turn to be better trader.

        Thanks again for reading my comment and replying. Appreciate. Your blog is immensely helpful.

        1. Jon Boorman

          I don’t know of one in the Bay Area, but online courses may be available, or I would suggest reading some of his and Michael Covel’s books first. There are plenty of online resources available once you start researching.

          1. Newtopips

            Thanks Jon. Appreciate.

  3. Nick

    Hi Jon:

    I have read Michael Covl’s book: “Trend Following” and also read Van Tharp’s “Trade Your Way to Fianncial Freedom”

    I also actively listen to Covel’s podcasts.

    How does one go about starting to build a trend following system? Where does one start? I have a couple of years of experience in trading using various indicators, but no consitent results.
    Thank you.

    1. Jon Boorman

      You will need a trading platform that has backtesting capabilities so you can start screening and building systems. I personally use trade navigator platinum from http://www.genesisft.com but tradestation is obviously very popular and there are many others. It will depend what you want your platform to do, whether it’s just for charting and testing or you also want to execute trades through it. There is a ton of stuff out there, look through stocks and commodities magazine, do some research online, try to go to a trading expo somewhere where you can view free demo’s and see it in action, take your time to get it right for you. There’s no hurry, the market will still be there when you’re ready.

  4. Nick

    Thanks Jon. I have ThinkorSwim.
    Do you only look @ Moving Average’s? Or are there any other inputs to your system as well?

    1. Jon Boorman

      Price only determines the trend for me, but MA’s can help give you context for that trend, it’s just a smoothing mechanism. ADX will tell you trend strength, you can also look at other things like volatility, efficiency, nearby support and resistance areas. My futures work is very systematic, the stocks part is more ‘rules-based discretionary.’

  5. Ales

    Great blog! I just found it recently and like the simplicity and transparency!

  6. Turtle Wannabe

    Jon, I enjoyed meeting, and your presentation last Tuesday at the MTA event. I have never followed a Blog but must admit that I have thoroughly enjoyed yours. So much so that I started in January, and am working my way to the present. I particularly enjoyed your February comments regarding Hope….probably because I have experienced the pain of Hopeium too many times.

    I understand the context of your comments to the previous question regarding MA’s as a smoothing mechanism, but could not help but notice that you use the 10/20 SMA’s on some charts and what appears to be an EMA on others. When do you choose one over the other.

    Lastly, how closely does the foundation of your entry/exit rules parallel what the Turtles used?

    1. Jon Boorman

      That’s great, thanks for reading Ron, I’m glad you’re enjoying it. The choice of MA’s is not a significant factor at all but the reason is down to timeframes. Because of the emphasis they give to the most recent data I tend to use EMA’s when analyzing shorter time periods. So for my futures positions which are typically held for shorter periods than my stocks, those charts will show a 10 and 20 EMA on a daily. For stocks I might use weekly charts where I show the last two years and use 10, 40wk SMA’s, and for a daily showing the last year I use 20 EMA, and 50, 200 SMA. The shorter the timeframe the more likely I’ll use an EMA but I’m not sure it makes a big difference, it’s a personal bias. Re turtles I’m not currently using a system that defines a trend by it making an x-day new high or exiting on x-day new low, but I’m working on something like that.

  7. Rick

    Jon, thanks for all of your fine work. It is very well-done and instructive.
    Today’s piece on gold is great. Gold will certainly be interesting to watch.
    Don’t you think your same line of analysis is even more illuminative when applied to silver?
    The chart is even more broken, certainly no signs of any support nearby. On an intermediate term $19 is certainly a possibility.
    I would think if desiring to short this would be more attractive.
    And no matter what the silver bugs think, silver is not a precious metal or a de-facto currency.

    1. Jon Boorman

      Thanks for reading Rick, I appreciate the compliments. I’m sure similar analysis can apply to Silver. I’ve concentrated specifically on Gold because it’s a position we’ve already held and commented on extensively, as Gold is part of the trend following system I highlight trades for, whereas Silver isn’t. That may change when I start to record signals for a wider range of markets.

  8. Chris

    Jon, do you just run your personal capital or do you run a fund/SMAs?

    1. Jon Boorman

      Currently my own, but have entity in place to manage capital, hope to finalize regulatory requirements and paperwork soon.

      1. Chris Stockton

        Very cool. I like your approach… send me an email if you begin managing client capital.

        1. Jon Boorman

          Certainly will, thank you.

  9. EJ Lem

    Jon: Nice blog. Wanted to say it’s refreshing to find someone trading a similar type of futures trend following system that I am implementing. Yes, there are others who are implement a ‘diversified’ portfolio, but I like your portfolio of 10 products. Simple, yet effective….as long as you follow the rules/signals (no second guessing). On your tweets, I like how you want an exit trigger to just happen. I’m the same way; at times I too just want the exit BUT I must fight my own emotions and adhere to my signals (good or bad…). Will continue to follow and recommend your blog to others…..

    1. Jon Boorman

      Excellent, thanks for following and commenting.

  10. Dave Smart

    Hi Jon, also enjoy your work and please let me know also when you get the go ahead for clients. Thanks,

    1. Jon Boorman

      I certainly will, thank you.

  11. Patrick Tan

    Jon, listened to your interview with Mike Covel. I have been following your blog and stocktwits page for a while. I’ve read Covel’s books and I use Genesis FT to back test systems also. I have two questions. (1) Any particular reason you prefer FX futures to spot forex? Genesis FT seems to have problems back testing forex pairs where USD is the lead currency (like USDJPY). (2) I would also like to learn more about position sizing/money management. My A/C size is small right now, so I just trade single contracts. The point of maximum risk comes when the position size increases, say from 1 contract to 2 contracts. Any useful pointers or resources you recommend for money management/position sizing? Many thanks! Patrick

    1. Jon Boorman

      Thanks Patrick. There’s no reason why you couldn’t effect the same trades with spot forex, I’ve chosen to always show the futures as part of a futures portfolio, and in terms of detailing the trades here, for consistency. I think I remember a similar thing on Genesis a while back, maybe try using the 57’s instead of 67’s if the back adjustments cause problems or just ask them they’re very helpful. Re position sizing the go-to resource there is Van Tharp and his numerous books on the subject. Maybe start with the link that’s buried half way down my performance page.

  12. Patrick Tan

    Thank you Jon. Using -057 is good for all futures except for agricultural ones, e.g. Soybeans. If you go to ZS-057 you’ll see a massive contract roll gap when July expired and rolled to November. I generally use -057 for everything except for the grains, cotton and sugar. I notice you don’t trade any of those, so -057 would work best for your backtesting I guess.

    1. Jon Boorman

      I do trade them but I’ve chosen to only ever talk about and show trades for the 10 major futures markets on the blog.

  13. Steven

    How do I join your blog?

    1. Jon Boorman

      Not sure what you mean, reading it is generally what most people do, there’s no membership or subscription, it’s all free.

  14. Anubhav

    Dear John, I am from Delhi and been following your blog, trades and tweets religiously. It’s been a great learning to see you trade and explain the science behind it for novices like me. Just wanted to thank you for the great help n inspiration that you are for upstarts like me! A true fan.. Anu

    1. Jon Boorman

      That’s great to hear, thanks for following, i’m glad it’s helping you.

  15. Keven Johnson

    Thoroughly enjoying you blog and tweets! First heard you on Covel’s podcast. Keep up the great work!

    I’m a total n00b to trading, and I really appreciate what you are doing on your blog; it’s been a great resource for me so far!!

    1. Jon Boorman

      Love hearing that, thank you!

  16. neeraj assie

    Hi Jon! I’m a money-manager & trader from Mumbai, India. Simply loved your podcast with Covel. As far as your blog goes, compliments for bringing your LIVE trades out there in the open, Its’ the ultimate proof that trend-following WORKS! Simply super…after years of buy-and-hold, i’m a convert now. Just a question on your stops: Are they triggered intra-day or would you rather execute them the following day if they are triggerred on a closing basis? Thanks for your time!

    1. Jon Boorman

      Thank you for the kind comments, exit signals are triggered at the close for next bar open.

      1. neeraj assie

        Thanks a ton!

  17. Brian To

    Hello Jon and thank you for inspiring everyday ppl and proving that anything is possible. I have followed your blog posts and truly amazed at your transparent success. Was wondering what your thoughts were on HFT and how you combat it..do you have your own algorithmic programs and is it an important issue for your survival? Also, do you offer training programs or education? If you could email me I would like to ask a follow up question. Thank you!

    1. Jon Boorman

      Thanks Brian, i don’t have any thoughts on HFT, it’s just noise and doesn’t affect my process in any way. I don’t offer any courses or education other than the posts on my blog, but best way to contact me is to connect on linkedin and message me from there.

  18. Roy

    Jon – great blog.

    Question for you on how do you handle your personal portfolio: When you get many signals to buy and you don’t have enough capital – how do you select which stocks to put money into? Also do you set up your position size small so you can trade more securities?

    Thank you in advance

    1. Jon Boorman

      Thank you Roy. This is a good question, one I’ve had a lot recently, and is a reflection perhaps of just how many good setups there have been recently. Up to now I’ve had to exercise some discretion, because I just can’t take them all, so I may reduce the position size, or limit the number of positions within the same sector, or prefer a larger cap name to smaller, one I know to one I don’t, things like that, but those aren’t ideal because they open me up to biases, and I’m not convinced just how much I should be applying portfolio level restrictions to stock screening. The final qualifier recently has often been the perceived risk/reward, ie likelihood of trend continuation vs placement of stop, but overall it’s a question I’ve been working on recently, and I may make the screens stricter, demand more of the trend to come up with even fewer, but stronger, ideas.

  19. Barton

    Hi Jon — thank you for the blog and the the interview with Covel. Can you point me to resources (either your own material or others’) regarding setting up an initial stop loss? And, more importantly for me, more info regarding setting trailing stop loss figures.

    I’ve been highly discretionary with exits (mostly with taking (limiting) gains). I’d like to see some ideas about a framework for trailing stops. I’ve studied some of your exits from your trade reviews. An article with more illustration would be great. Thanks.

    1. Jon Boorman

      Ideally your exit should be an invalidation of your entry rationale. If you set your stop at a point at which it would mean your position is now unequivocally wrong, then you will have no hesitation or subsequent regret at taking it. I wrote about this here http://jonboorman.com/when-to-exit-a-trade/
      A lot of trend following systems will use simple breakout or x-day high strategies, ie buy the 50-day high, sell at the 25 day low, this can then be totally systematic and remove all discretion in your stop setting, they often use ATR stops as well, you can find a lot of resources like this one online http://www.incrediblecharts.com/indicators/atr_average_true_range_trailing_stops.php

      1. Barton

        Thank you Jon. I will continue to study, finish reading Covel TF book and re-read Tharp’s again. thanks for the links

  20. Jim

    Hi Jon,
    I wanted to get your thoughts on back testing software and how important this is for system development. Several back testing software sites are very expensive and also may require someone like myself to hire a programmer. Costs for some sites is >$3k plus the cost for data. I would like to know your thoughts, is this necessary, and any possible recommendations.
    Thanks Jim

    1. Jon Boorman

      I use Genesis Trade Navigator Platinum for my charting and backtesting. It’s all I’ve ever used, think I’ve had it nearly 10 years now, so I’m probably not the best person to ask how it stacks up compared to others that are available out there, those costs sound about right, and training is often available, I had no experience of programming either and don’t enjoy that side of it at all. I don’t need testing to show trend following works, I already know it does, but testing can help with position sizing strategies, different stops/exit strategies etc. It might seem like a lot of money but years ago I figured it was necessary and you just had to bite the bullet and do it, do plenty of research so you’re sure you’re getting what is best for you, there are probably many resources and forums that can help find the best one for what you need.

  21. SanCha

    I have a tendency to buy 1000 shares of anything as long as it is <$70 per share. This method has not always worked for me. You mentioned in one of your tweets that you buy few. For example, at its current level how many $FONR would you buy? It is under $10 bucks. Thanks.

    1. Jon Boorman

      I would recommend you read some of Van Tharp’s work on position sizing.

      1. SanCha

        Thank you, it was a nice read. I have missed many opportunities just because I was scared to buy a thousand shares. Waiting for and buying after a dip hasn’t worked either. Example bought $MU at $14 after $INTC dropped and stopped out at 13. MU later passed 18.50. All of my stock choices have been excellent. I go by fundamentals and my impression of a how company is really doing. I should be long but I end up swinging.

  22. Rich

    Are you now managing assets for others? If yes, please provide a way to contact you or contact me at the email provided.

  23. SanCha

    I want to learn about investing. Which book should I buy first? Are Jim Cramer’s books OK and which one? Do you focus on fundamentals or technicals or both?

    1. Jon Boorman

      Read my FAQ page, you’ll find all the answers there.

  24. Robert

    I’ve been following your blog/tweets for several months and just wanted to say Thank You for all the extremely valuable info. Hope you and your family have a great holiday!

    1. Jon Boorman

      Thanks Robert, I’m glad you’ve found it helpful. All the best for 2014.

  25. Hari

    I remember seeing your yearly premium service, a promotion for December 2013. I am not able to locate where did I see, Do you offer Premium service for stock selections to your members

    1. Jon Boorman

      No, wasn’t me, for now everything is still free

  26. James Peck

    Hi Jon I just joined on stocktwits. I am also making some calls on the site. I also trend follow. I only use candlestick charts and sma. I have spent a lot of time with efficiency. I don’t like to have capital fighting through noise. So I tend to exit trades fairly fast. I recycle the funds to a new short term trade which I think will have a better chance. I believe that probability and length of time in a trade are not relative. Meaning you can have a trade last 2 months or a trade last 3 days and have a similar expectancy. Of course the longer you are in the trade the more potential the trade will move further for you or against you. Naturally this would happen assuming you are allowing more room due to a longer duration for the trade to work.

    I personally tend to spend more time working with trade management. Entry stays the same but managing the trade through different risk rewards and percentages per trade as opposed to strategy. No need to reinvent the wheel. Basically in a nutshell i’d rather go heavier in a shorter term trade with strict rules on exits then diversify my account into several longer term trades. This allows for a faster turn around and more Time Efficiency meaning less capital fighting the waves of a trend. Also if you choose to compound the turn around is much faster to allow more robust growth in the account.

    I have also done some work on risk per trade . I have found that your risk reward in relation to win/loss ratio for each trade makes a big difference on what risk should be allowed per trade. If you have a higher win ratio you can risk more per trade. I always read that max percentage per trade should be …… I believe a general max risk per trade is a fallacy. After looking over the variables a traders max risk per trade should be relative to the risk reward a trader is trading combined with the win/loss ratio. I found that with my trades last year I could of risked 8 percent per trade. Trades lasting 1 to 3 days. Even with a larger drawdown the gains were more then exceptable .

    Any constructive criticism or general thoughts would be highly appreciated. To be honest I have never met anybody in person that understands anything I have to say. This is due probably to geography. Most traders I have met are really in the dark. I have been trading for five years. I have spent endless hours fine tuning my strategy and just have a deep passion for trading. I have devoted my life to trading for the greater good. I read your bio and was instantly intrigued. Also I am impressed with the candid information that you have presented.

    I have found it difficult to find any work trading. I have no college degree. I started a construction business right out of high school. The problem is I have zilch passion for construction ha ha. Which is why I decided to join stocktwits. Any how sorry for the long rant. Have a good one!

    1. Jon Boorman

      Thanks for your message James, you should send something to me on StockTwits so I can follow you there. I agree with the emphasis on trade management and exits rather than entry. The risk per trade element comes into greater focus with regards to losing streaks, with a low strike rate trend following you can expect to have long losing streaks, it’s different for trend following stocks because by definition you’re only going to be exercising that strategy when in a bull market, if a bear market comes along every long would be hedged and the futures strategy would utilize most of my funds. I’m glad you’ve found your passion in trading, it’s a great industry in which to make a living, hope we have an opportunity to meet or talk some more. Thanks for reading.

  27. James

    Yep, I here you about risk to ruin. I have set thousands of even risk reward trades. Simply using broken support or resistance with a couple basic rules and smart stop placement. I have a decent win rate and fairly quick turn around for a swing trader. Some trades close in a day. So i look at my potential losing streak as if i had a lopsided quarter with lets say heads having a 70 percent win ratio and tales having a 30 percent win ratio. It would be a fairly catastrophic event to go bust at 5 % risk per trade. I have used dice as an experiment to better my feel for statistics. If the dice hit 1,2,3, or 4 its + 5% if the dice hits 5 or 6 it’s – 5%. That would be a 66.6% win ratio long term with an even risk to your reward. Start with a rounded figure and compound your winnings every 10 trades to 5 % of the new account balance. Compounding can work negatively with a lower win rate if you compound each trade. Then do it at 10 % per trade and see what happens.

    I understand the dynamics of trading aren’t fixed with these odds and future performance may vary. At the same time the market is not random and human emotion will take a long time to evolve if ever. Some charts may be more volatile then others but the similarities of patterns is overwhelming. Or maybe it’s the fact that things simply either go up or down. Lack of variables means similar sequences will happen repetitively. These sequences though seem to happen at certain times to a higher degree then a fifty percent chance.

    Obviously i set my self up for debate with these statements. Simply though i see my work or any other profitable traders work as a philosophy of avenue. One which guides us through the narrow path of profitability.

    Thank so much for the reply! I will shoot you a message.

    James Peck

  28. George (@GeorgeMPorgie)

    Jon, really enjoying your website and twitter feed. Thanks a lot for sharing your experiences and ideologies.

    1. Jon Boorman

      Good to hear, thank you George.

  29. Jennifer

    Jon, quite impressed having read your interview with John Navin. For small time investors like us ($60k portfolio), I sure hope you don’t stop tweeting your trades. P-L-E-A-S-E.

    1. Jon Boorman

      Thank you, I appreciate it. For regulatory purposes I do need to make a clear distinction between the blog and what I do for clients, but I also still want to be able to offer people access to those ideas, so I will be shortly be using the Benzinga ‘Marketfy’ site where my stocks signals will be part of a subscription service. On the blog I can then still talk about the market in general, write educational pieces or occasional commentary on existing positions, just not specific entries and exits before the fact.

  30. Jennifer

    Understood, Jon. How about specific entries and exits immediately after the fact? I hope your subscription service is affordable to small time investors like me. And thanks for what you do.

    1. Jon Boorman

      I guess it might be possible to do a piece at weekends on what trades were made during the week. Sub service would likely be in $95 a month/$995 a year range, so that for a $50k portfolio it would be in line with the 2% AUM annual fee a client would pay.

  31. jeff gao

    Hi Jon, I enjoy reading your blogs and keep learning from you. I have a couple of questions hope you can help me: 1) if one of the stocks in your watching list is stronger and better than the one in your holdings which is weak and in a consolidation mood but hasn’t triggered the sell signal yet, are you going to sell it and switch to the new and more promising candidate in the watch list? 2) After you sold ATVI last week, why not add a new entry since you have so many good stocks you are watching? you can easily pick up another winner.

    thank you very much and have a good weekend.

    1. Jon Boorman

      Thanks for the compliment.
      1) That strategy is certainly an option but it can result in extraordinarily high turnover and longer-term can do more harm than good instead of just giving trends that haven’t invalidated room to breathe and resume their path.
      2) It’s possible I may enter a new name Monday, but I could also easily use the funds to add to existing names as many have also made new highs and had their stops moved up.

      1. jeff gao

        Thank you Jon. My personal experience and mistake is that I can not resist the attraction of some “strong stocks” and end up selling consolidating stocks and chasing high flyers. The result: buy high, sell low. After reading your post I realize this mistake now and will try to stay more calm and take less actions. You are perfectly right when you say: “longer-term can do more harm than good”. I admire your calmness and discipline when trading stocks. Again: Thank you.

  32. Duane

    Hi Jon, just listened to your stocktwits podcast, loved the bit about changing to an ATR stop on a big fast mover. Can you steer me in the right direction on an ATR you have found to be most useful in that regard?

    1. Jon Boorman

      For that specific purpose a 6x 100-day seems to work well, it sits well below the action when its not needed and comes into play for huge gaps or parabolic runs until regular methods can be resumed.

      1. Duane

        Thanks for your generosity.

  33. Ray

    Jon what are the downsides of your strategy? Seems like it works better in normal times or in gradual bull or bear markets, but is very vulnerable in volatile times when scrips can gap significantly lower the morning before you sell or a lot higher after you have just sold. And if you are holding mostly cash while the broad market shoots higher, you may just have lost that oppty. Wrong assessment?

    1. Jon Boorman

      Hi Ray,

      Yes, a strategy isn’t ‘not working’ because it’s going through a drawdown. All strategies have losing periods or market conditions in which they will underperform. How one reacts to those conditions however is exactly what makes it work longer-term, by avoiding the worst of the downturn. While we’re always going to be exposed and vulnerable to the initial pullbacks from the highs, and at risk of whipsaw, if stocks were to continue to trend lower for losses of 20, 30, 40, 50% as has happened in the past, we would already be long gone and in cash awaiting new opportunities.

      Re exiting, yes it’s possible a stock can gap lower after an exit has been triggered, or rally after we’ve exited, but stocks can also gap higher the next day as we sell, and continue to go lower after we sell. The position size is what makes those potential downside scenarios tolerable, for example, if I’m only risking 0.5% on a position with a stop 10% away, it closes 1% through my stop but then gaps open a further 9% the next day’s open so I exit with a 20% loss instead of 10%, I’ve just lost 1.0% instead of 0.5%. It hurts but it’s tolerable.

      Re holding cash, yes you’re vulnerable to whipsaw, we’ve already seen that many times previously with all of the V bottoms which occurred when we were down to just a few holdings and 40-50% cash, but in each case we took new entries as they presented themselves, made back the shortfall, and eventually began outperforming the market again. It’s not possible to protect from further downside without also potentially missing out on some short-term upside. To get 100% of the upside you’d need to tolerate 100% of the downside. That’s buy and hold, maximum gain = maximum pain. I prefer to buy stocks that are in established uptrends, buy them on strength, and sell when their trends are invalidated for my timeframe. If there aren’t any opportunities then I’ll be in cash waiting until they appear.

      Hope that helps.

  34. Ray

    It sure does. Thks for the expln.

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