This note follows some thoughts arising from the events that was reported in Trading Note #4.
So far, all my stock buys have some basis of fundamental analysis attached. As I have not yet cultivated the long-term buy-and-hold strategy, I am still interested in benefitting from intra-day price movements.
If I would like to go long on a stock, what I'm thinking is this: Buy in with say 1/2 of your allocated capital first. If the stock price goes up (intraday), sell off the stake that you initially bought. If the stock price goes down, buy in with the rest of your capital (1/2) at the lower price.
Similarly, if I would like to go short on a stock: Sell off 1/2 of your holdings first. If the stock price goes up, sell of the rest of your holdings. If the stock price goes down, you could potentially buy-in depending on the drop.
Does this strategy work?
Not quite. In the case of going long, selling off a stock once it goes up is like selling off your winners instead of letting them run. You should only do that if you are _sure_ that the stock is fluctuating within a fixed trading range. Hence you shouldn't sell when it goes up, meaning that the entry price for the other 1/2 is going to be higher (if the entry takes place at all).
In the case of going short, if the stock price does not drop to a sufficiently low level, then the selling point for the other 1/2 of the holdings will be lower (if the selling takes place at all).
Hm, doesn't seem like you can have your cake and eat it too =)