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Top Stock Picks Portfolio Comments2010-08-29: This is still going to be a trader's market until our long-term, trend following indicators turn positive. Short-term, swing trading positions we are taking on the long side (based on breakouts and MACD crossovers) are **** and ****. Target profit objective is ****.
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| | Trend Following Portfolio Q&A View Select Entries from Our Mailbag. Also See Our Q&A Page.Q: Hi Fellow Michiganders, I'm a new subscriber and was wondering why you would want to "short" XXX in the "Trend Following Portfolio" and take on the added margin fees instead of just going long the XXX??? Thanks for your time and efforts... A: Hi,
Two reasons why we prefer to short XXX instead of going long XXX in our margin account:
1. Back-testing gave us better returns using the short instead of the long ETF. Not sure why, but that is what the results indicate.
2. There is no margin interest on short positions, since you haven't borrowed any money. Our strategy is to be short the three ETFs in an amount ranging from 30% to 45% of the GSA Portfolio, effectively increasing our leverage without paying margin fees. Of course, leverage cuts both ways, so one has to be even more careful.
In addition, for our non-margin accounts (IRA, 401k), we execute LONG trades on the leveraged ETF counterparts.
Hope that helps.
Best regards,
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