/biz/ - Business & Finance

>>17685584
>Would you be so kind and elaborate little bit more in the futures thing? you unload even if you lose money so you can buy back in later? any kind of example would be super helpful as im struggling with exactly the same thing
I start with 2 fundamental beliefs. 1) In the long term the market will be higher than it is right now. 2) In the short/medium term the market will go up and down. So if the market will be higher than it is today, the best strategy is to be long the market with leverage. The danger of leverage is the possibility of a margin call so we must manage the leverage responsibly in such a way to avoid one. My leverage comfort zone is between 3x and 4x. I don't like going below 3 cuz I feel like I'm sacrificing gains but I don't like being above 4 cuz that can get a bit tight when the market gaps down like it did in futures Sunday night.
So if you're in a leveraged position it's important to very nimbly manage it, quickly reducing leverage or increasing it as the situation dictates thus why a futures account is important since it lends itself to fast buying and selling and consistently high liquidity.
Alright, I'm in my position. I am presently 3.5x leveraged and that's my preferred multiple. As the price rises my leverage naturally decreases from 3.5 to 3.4 to 3.3 and so on since my borrowed amount is constant while the gains from the rise in price are added to my principle. The only way to raise my leverage back to 3.5 is to buy another contract. Wash rinse repeat as necessary.
If the price drops my leverage naturally increases from 3.5 to 3.6, 3.7, etc. since my borrowed amount is constant but the losses are subtracted from my principle. The response is to reduce the amount borrowed by selling a contract bringing my leverage back to 3.5x. Continue as necessary since you can contain losses and add the contracts when the price turns around. The time to strategically add/remove contracts is on pullbacks in the opposite direction of the trend