Trigger Strategy


Goals:

  • Maximize gains
  • Use a very low-cost ETF (VOO) that emulates the S&P500
  • Minimize losses by use of trailing stops
  • Use dollar-cost averaging principles to buy back in
  • After a sell, move back in as quickly as possible but watch out for long-term falling market
  • STICK TO THE PLAN!

    • Rationale:

  • S&P over time averages 10% growth
  • Using a trailing stop removes emotional impacts
  • Use of a very low-cost ETF (0.03% expense ratio) is least cost
  • Use of a discount broker (Schwab) has virtually zero cost (no commissions)
  • ALWAYS set a new trigger anytime a buy is executed---stay protected!

    • Special Considerations:

  • If the market seems to be in a significant down-swing, consider delaying buying back until the market has "bottomed"
  • Buy backs might have to be delayed up to 2 days due to waiting for settlement dates to pass (usually 2 days)

    • Concept Example:

  • When the market goes up, the trigger follows the market
  • When the market goes down slightly, the trigger does not change
  • When the market goes down more, and hits the trigger then an immediate sell order is executed
  • Buy back into the market as quickly as possible but use dollar-cost averaging to reduce risk of bad timing. For example, buy back 20% each day for 5 sessions