Three Types of Stock Traders
Most stock investors and traders have a duration in mind for each investment. If they don’t then they probably don’t have a plan, or they have delegated the planning to someone else. This generally means they also don’t make decisions about when they should buy an investment and when it is time to sell it. 1) Some buy to hold an investment. 2) Some buy simply to exit quickly with a profit (or a loss) on that same day. 3) Still others notice patterns of behavior that could result in a quick profit in a short time period without trading in-and-out on a single day.
I belong to group number one, most of the time. When I buy an investment, 99% of the time my plan is to hold the investment for a long period of time. That means I am thinking I will still own the investment five or ten or more years from the purchase date. Sometimes, however, I purchase an investment with an expectation that I will be selling in the next couple of weeks or even days. That doesn’t mean I am day-trading. I’m not usually buying an investment at 9AM on Monday only to sell it a couple of hours later.
Stock Prices and Patterns
Rarely does an investment have a pure upward or downward price trajectory. Much like my granddaughters on a swing, they are up and then down. Sometimes the swings are wild and other times they are less pronounced. Many years ago, I noticed some repeating patterns with AT&T’s stock (ticker – T). It was like a swing. The stock would head up for a couple of days, then move down for a couple more days, and then head back up again. I would attempt to buy some shares on the downward fall and then wait a few days and sell them for a nice profit. Unfortunately, AT&T isn’t quite as predictable in recent days. I just hold AT&T and collect the robust dividend.
Enter DDD as an opportunity
Many years ago (2013), 3D Systems Corporation (DDD), was the darling of 3-D printers. Through its subsidiaries, DDD provides 3D printing and digital manufacturing solutions worldwide. Then the investors realized the anticipated growth wasn’t there and the stock’s price plummeted. Recently, however, there has been renewed interest in DDD. Trading volume has skyrocketed higher. There have been wide swings in the price of the shares on any given day. At this point today, DDD is up 30.75% on the day. Tomorrow, however, could find investors running for the exit. If you look at the graph for DDD, you will see that the share price recently skyrocketed, then retreated and bounced around only to skyrocket again today.
As you can see, I had a sell limit order to sell my shares at $26.65 (1). If I got my price, I could expect to realize a profit of about $145 (2). My first swing trade gave me a profit of $107, so this trade could be more profitable (3). Bear in mind that my total investment dollars (4) was reasonably small compared to our total investment portfolio.
Will I do another swing trade with DDD next week? Perhaps. I will become interested if the price drops to $25-26 per share. I will buy in small bites and won’t buy more than 60 shares. The following shows my results for the first two weeks of January. This is all pure profit with no income tax liability. My ROTH IRA is a good place for this strategy.
Know Your Flocks & Herds 