My Gambling Portfolio

If you have some extra money laying around why not take a gamble on the stock market? Use money you are comfortable losing and I'm talking about losing it all.

I do this from time to time to try and squeeze out some extra capital gains from my portfolio. It's important to remember that I don't use money I have saved for retirement or that I'm counting on for an emergency.

This is money that Harry Browne would refer to as a Variable Portfolio.
I like to call it My Gambling Portfolio. You simply construct your holdings in a separate account usually an open or non-registered account with your discount broker. I start with 20K and pick 5 stocks, investing no more than 4K in any one position.

I may hold these stocks for a week, a month or as long as 3 months. As long as the stock is showing positive momentum to the upside I keep holding. As soon as volume picks up to the downside or has topped out, I sell.

This takes a lot of patience and practice. This is why you only use money you can afford to lose. I will only let a position lose 10-15% before I sell it and buy something else with the money that is left over. This is to keep your losses to a minimum. I believe this is how to get ahead playing this game. It is a game and these are some of the buying and selling rules I follow.

How I Buy Gambling Stocks

• scan for stocks making huge percentage gains that day
• filter out the stocks trading 50% below their 52 week high
• eliminate those stocks above 50% of their 52 week high
• stock must average 50,000 shares traded
• I only buy stocks listed on the TSX
• I don't buy TSX Venture stocks, too risky

By picking stocks 50% and under their 52 week high you have a good chance it will get back to that level. It's been there before so I'm taking a gamble it will reach that again. This is how I hope to eliminate my risk.

Once the stock has reached that level I put it on a watchlist for at least 3 days before I buy it. I want to make sure it's moving up before  commit.

Example: Stock XYZ has jumped 10% today and closed the trading day at $1.50 after trading over a million shares. I check the 52 week high/low and it's $1.10/$4.20. This represents a $2.70 upside before i reaches it's 52 week high. Almost 200% upside. Let's say I sell it at $3.00. That would give me close to a double if I bought the stock around those levels. This is what I'm after.

When I Sell a Stock

You have to sell as soon as you realize you made a mistake and the stock was just a false breakout.It happens but you must SELL your losers early and invest in a better opportunity. It is hard to sell a losing position but you must befor it becomes a catastrophic loss. I see people hanging on after losing 50%. This is just plain stupid. Your stock would then have to double from there for you just to break even. Hard to do.

• sell when losses are 10-15% - YOU MUST!
• once trading volume dries up
• volume is rising and price is falling
• price is rising and volume is falling
• you have a 50-100% gain and market is turning over

Protect your gains and NEVER EVER average down on a losing position.You hear traders doing this all the time. I'm not a professional so I don't do this. I'm trying to protect my capital and grow it, even though this is money I can afford to lose. I can't say it enough, sell your losers early and look for better opportunities with the money you have left over.

How To Play The Game

• Divide your 20K into 5 stocks @ 4K a piece. 
• Monitor daily for gains and losses
• try for at least a 50% gain in winners
• sell when losses are no more than 10-15%
• even if you have 4/5 losers you can still make money on that one stock
• stick with it and keep building on your 20K
• if you reach 25K then up your position size to 5K 

Keep investing more in each stock as your money grows. Once a year take some of your profits and go enjoy yourself like taking a trip. This is what it's all about. Hopefully you will have some profits, just remember to cut your losses early and stick with it.

NEVER buy stocks making new 52 week highs. Many people are successful using that strategy, I've just never been one of them. You have a better chance of trying to pick stocks off their highs and are now starting to pick up again. Hopefully reaching that high again or close to it. We are just trying to go along for the ride and clip off a little of that gain.

If you are looking for money to gamble with, you might check out some of these ways to save some of your household cash flow for investing or gambling.

My Gambling Stocks 

I haven't deployed all of my 20K as of yet but have purchased 4 positions they are;

Eldorado Gold (ELD) 3000 shares purchase price = $1.54 (5.4%), high low $1.03/$4.16

Excellon Resources (EXN) 2800 shares purchase price = $1.41 (1.4%) $1.22/$2.30

Tahoe Resources (THO) 600 shares purchase price = $6.77 (1.4%) $4.75/$12.52

Wesdome Gold Mines (WDO) 2000 shares purchase price = $2.29 (1.3%) $1.64/$3.60

These are my holdings as of 8 June 2018.

As you can see all these positions are in the junior gold/silver space. I believe they all have the potential to gain 50% from current prices. 3/4 stocks are in a winning position. I'm just looking to hit singles here. If these stocks reach my goal I will sell them as long as momentum is still positive. I don't like to give up those gains once I've made them.

Before investing check the sector. Is it a positive environment?

Right now some Weed stocks are on my watchlist and well off their 52 week highs. Select gold and silver companies are also beaten down and could provide great opportunities right now. 

Try to block out all the financial pornography out there and instead just watch what the market is doing and make your own opportunities. If you trade in and out of stocks based on what some TV guru is saying you will never know when to sell to make money.

My Final Take

You only make money when you sell a stock. Sell you must, that's the easy part. Your stocks will go up one day and down the next.This is how the market works, Don't get discouraged but also NEVER hang on to losing positions too long. Invest in something else. Just try and hit some singles instead of home runs. They add up over time.

Always keep a watchlist of certain stocks that are moving up after suffering a setback we talked about earlier. I will try to update and publish a list of stocks on my list. Once a stock starts moving down, just drop it from the list if volume and price start moving against you.

I also look at the technical chart to see if the stock is also breaking out on high volume.

This is just what I do to generate some extra capital gains and hopefully minimize losses. What do you do?

Related Post: Risk-Take Some What Have You Got to Lose

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