Making Big Money 5/4/14

How does one make big money in the stock market?

George Soros’ Chief Technical Analyst was asked the question that since he figured out the trades for George, what was the difference between him and George Soros in trading? After all George was following his direction regarding the currency trade that almost brought the Bank of England down. The answer given was George had a lot more “Kahunas” then he had. In other words George was a much bigger risk taker. In order to make big money, one has to take more risks and put more money down on the table. That goes contrary to what I want to do, as I am not a big risk taker. Therefore even with my great technicals. I make small amounts of money as I take small risks..

Here are a couple of examples of stocks that have done well that I trade. RFMD is the first one. I made a modest amount of money on it. I missed the re-entry signal and after placing a couple of limit orders, did not manage to get in. Meanwhile an associate of mine purchased $75,000 of RFMD and rode it up from $5.50 to $8.65. His trade netted him over $45,000 and he is still in it. The risk he took was that this trade was on an account that was about $95,000. His position sizing suggested a significant risk, although I should point out he had thoroughly checked out the company;s fundamentals and felt he was on solid ground. I am back in it with a small position again based on technicals. Incidentally the trading system I am using is simply a MACD with a 9 exp moving average cross. See chart below.

The next trade I am in is SU. This is a company that makes oil from sands… the latest energy craze. In this case I saw that there is very good option activity on the stock. So instead of risking capital by buying the stock, I purchased straight call options. Call options increase in value as the stock goes up. Back in March I purchased June call options at a $34 strike price. The price has shot up from $33 to $39. My call options are up 400%. I made decent money but not obscene money. Why? Because I did not buy a very large number of call options. I am still in this trade but the old adage goes “No risk no gain”.. I remind myself that the rich got there by taking large risks at some time in their lives. I feel I cannot do that with our portfolio as I am obligated to provide funds to my family when I am no longer here….the downside of making lots of money is losing lots of money…