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I do not trade stocks but couldn’t help trading BABA

BABAIf you follow my blog, you know that I use two strategies –

1) I invest into dividend growth stocks
and
2) I trade options.
 

When speaking about stocks, I invest into stocks. I do not trade them. In the past I chose dividend stocks for two reasons:

  1. Dividend income
  2. Long term investment

In the past I tried to trade stocks and apply a buy low sell high strategy. I always ended up with buy high and sell low result. I must admit I sucked in trading stocks. I remember once I wanted to get a better price of Johnson & Johnson (JNJ) stock. So I sold it at a lower price than I originally bought it hoping the stock would fall lower and I buy it back at a much lower price. The exact opposite happened. I sold it cheaper than I bought it originally and bought it back higher than I bought if in the first place. Bummer.

After I successfully repeated this silly strategy adding to my losses I realized that I act like an idiot and put a halt to it. It was a time to change strategy.

Dividend stocks strategy

When thinking about a buy and hold strategy I wasn’t comfortable with it. I wanted action, but safety at the same time. I wanted safety and income at the same time. A dividend growth strategy was the answer.

So, where is the action in dividend growth strategy? It is considered a boring investing. I saw action in building a portfolio adding to positions, little by little and see my income growing. Picking stocks, evaluating them and most importantly looking for the best buy point.

I substituted trading stocks with trying to get the best entry point into a stock. It provided me with the desired action.

Some investors take a certain amount of cash every month and invest it in a regular manner without a regards to a current price of a stock. They cost average their positions. Although it is a legit strategy, it wasn’t for me.

In my heart I am a trader, not investor. Analyzing charts, looking for supports and resistances to find the price I wanted to buy a stock. This satisfied my trader’s desire.

Getting a better price of BABA

Two weeks ago I saw an opportunity to repeat that silly strategy I tried so many times in the past and failed. I saw an opportunity to sell my position in Alibaba (BABA), wait a bit and buy it back cheaper.

In my post about a new trade against BABA I described my reasons why I bought this stock. Now I saw the stock falling. It is not a dividend growth stock at all. It is a speculative, growth play.

I originally bought the stock for $89.9 a share. I could sell it for $88 a share and immediately I placed a limit order to buy it back for $86 a share. A few days later, the trade executed and I bought BABA back for cheaper.

This is not to say that I am going to do this on a regular basis, not at all. I still do not trade stocks. It is just a humble report to my readers about my swap trade, which ended successful.

I hope you had a great last week and be able to spot good stock opportunities.

Good luck!
 





4 responses to “I do not trade stocks but couldn’t help trading BABA”

  1. Martin, you know I like BABA from my posts about it and I’m glad it’s up again for both of our positions. When you sell for a loss and then buy back within 30 days, do you not factor in the wash rule?

    As volatile as the indexes have been recently, I’ve added in a few individual stocks (via naked puts) too versus my normal strategy of focusing on ETF options. Just be careful not to get too far away from your investment plan. You built your strategy for a reason. Don’t let BABA be a gateway stock. It’s a slippery slope. :)

  2. Martin, you know I like BABA from my posts about it and I’m glad it’s up again for both of our positions. When you sell for a loss and then buy back within 30 days, do you not factor in the wash rule?

    As volatile as the indexes have been recently, I’ve added in a few individual stocks (via naked puts) too versus my normal strategy of focusing on ETF options. Just be careful not to get too far away from your investment plan. You built your strategy for a reason. Don’t let BABA be a gateway stock. It’s a slippery slope. :)

  3. DivHut says:

    I know we spoke about BABA in another post you wrote a while back and though it does not fit any of my investing criteria either it is a stock that still intrigues me for the long term. I can understand why it has this allure for you too.

    • Martin says:

      I agree with you. I believe this stock is a good growth play. There aren’t many out there, but time to time a good stock opportunity presents itself. A few years ago it was Visa, then Netflix and in 2006 it was IBM. I missed them all.

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