Investing

It’s All About Balance

By Adam O'Dell  |  July 4, 2018

I have a lot of empathy for investors these days.

Investors of all ilk are getting bounced around as the market wears on the convictions of both the bulls and the bears.

It feels like we’re in one of those “damned if you do, damned if you don’t” sort of situations.

Stock valuations are still high. And many would argue that the geopolitical climate has never been more fragile and unsettled.

The action-oriented question all investors are struggling with is:

“How do we make money, today, while also guarding against an ever-uncertain tomorrow?”

My answer to that isn’t sexy. But it IS actionable.

You see, successful investing requires a healthy balance of patience andaction.

As I told my Cycle 9 Alert readers, Wall Street’s “-isms” can lead you down a bad road if you take the advice to extremes.

For instance, consider these competing nuggets of wisdom:

  1. “Cash is a position,” and
  2. “You’ve got to be in it to win it.”

The former implies that being out of the market (i.e. “in cash”) is OK. The latter implies that if you aren’t fully invested, somewhere… you aren’t really an investor.

So, which is it?

I’ve learned over the years that a “middle-ground” option is usually more favorable to the extremes. Successful investing is all about balance.

For my Cycle 9 readers, that means staying fully invested most of the time (we adhere to trend-following risk management rules)… keeping a diversifiedportfolio… and limiting time exposure to any one trade.

It also means we don’t force new trades, just for the sake of trading. As I told readers before, “Sometimes the best trade is no trade.”

Successful investing requires a healthy balance of patience and action. Waiting patiently for the right opportunity to get into the right investment is almost always rewarded.

But the balance between patience and action doesn’t just apply to the buy side of the equation.

Every good trade is made of a good buy and a good sell.

I designed Cycle 9 Alert to give crystal clear buy signals… and a well-defined exit plan, allowing us to balance patience and action.

Let’s consider another of Wall Street’s both-sides-of-the-mouth advice…

You might have heard the phrase, “You can’t go broke taking profits.”

How about, “Let your profits run”?

So which is it?

I’m sure you can remember a stock you sold for a nice profit… only to see the rally continue on without you. Just as sure as I bet you can remember a stock you sold for a nice profit… very close to its peak.

The point is, the decision to take profits can cut both ways. Sometimes you’re glad you did. Other times you’ll regret it.

Again, I’ve found the best success in a common sense, “middle ground” approach.

My research shows there’s a high-probability, high profit-potential “sweat spot” following my Cycle 9 algorithm’s buy signals. It lasts for two to three months.

After that window of time, the chance of continued success drops to 50/50 – odds we’re happy to leave to other investors.

Our relatively short holding period allows us to routinely capture the “meat” of strongly profitable moves, without overstaying our welcome, so to speak.

Essentially, we strike a healthy balance between “you can’t go broke taking profits” and “let your profits run.”

And this approach is my action-oriented answer to the question we began with:

“How do we make money, today, while also guarding against an ever-uncertain tomorrow?”

Taking our profits (or cutting losses, when occasionally necessary), after two to three months, meets our requirement to manage risk and adapt to changing market conditions.

This balance of patience and action has worked out quite well in the six years I’ve been running Cycle 9 Alert.

And recently, it helped us make some nice profits on both sides of the market.

We captured profits of 21% and 45% on a bullish play on the biotech sector… getting in and getting out in just over two months.

We also made a nice profit betting against the utilities sector. This “short” play unfolded even quicker, allowing us to lock in 75% and 84% profits in less than six weeks!

It was tempting to hold out longer for even bigger gains, but my system said it was time to sell… and so we sold.

The point is… we caught the “meat” of the move, locked in our profits, and moved on.

We struck a healthy balance between patience and action – typically the best thing you can do, particularly in a market as choppy as this one.

Adam O'Dell

As Chief Investment Strategist for Dent Research, Adam O’Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with minimum risk. He achieves this with his perfect blend of technical and fundamental analysis.MORE FROM AUTHOR