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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Logain Ablar who wrote (38891)	2/16/2003 1:01:36 PM
From: j g cordes	Respond to of 71349

Tim, Yes, the mantra of buy and hold stems from some unanalyzed beliefs (skewed stats) and some of it comes from marketing to encourage people putting money in funds. The Dow and other averages are deceptive proof of buy and hold strategies because the constituent stocks in the averages are always being pruned to reflect good performance. If a stock falters badly its removed and a newly successful company is put in its place. The only way one could say buy and hold is the right thing is to buy and hold the index or its proxies. If one were to simply buy and hold any stock in the averages one's chance of having a major loss would be equal to the failure rate .. conversely the success rate would be the index minus its cost of carry and trading costs. It might be profitable to focus only on a segment of the indexes.. those stocks that are added certainly get a boost from broader participation. However I don't know what causes one stock to be added versus another.. is it formula or political? It might be worth while to back track the characteristics that groom stocks to be included. There must be some things that they have in common prior to inclusion and some things in common well before that. Buy and hold also attempts to insulate investors from the burden and follies of buying rumors, stocks that have already run to their highs, from buying high and selling low.. no doubt the funds have learned how to do this so we needn't worry money is less safe with them.. :!) One thing that used to bother me about trading was the cost of entry and exit. But today, with the ability to buy a large or small position for only 7 dollars.. unless one is a trading maniac its possible to dump loses when they happen and take small profits as they happen. This fact leads to the obvious.. If little guys like you and I can be in and out of positions for .014 % of a 10,000 dollar trade.. imagine how often and how finely the institutions and hedge funds are slicing it on an hourly basis. Computer black boxes that are trading on their own fifty times a minute.. at the end of the day the owner opens the box hoping to find some fish just like a trawler dragging a net through the ocean while everyone has lunch. Of course there's the other aspect of buy and hold which is judging when to drive a stake into the ground for long term value. But I'm sure there are many authors in the process of writing about this subject.. perhaps some with a title like "Trading Value Stocks for short term gains"