Dealing with Volatility

"Get use to disappointment." ~ Man in Black from The Princess Bride
 
I expect extreme volatility will be the norm for the rest of 2011.  Also, I think the overall trend will be downward.  For example, if I had kept the shorts that I closed on August 8, 2011, I would have made more money shorting.
 
I will try to take advantage of the volatility.  My solution is to stay mostly in cash.  I will buy on the dips and sell into rallies.  Then, I will short during rallies and close my shorts during dips.  I will keep positions small, less than 5% of our portfolio.  That way if I'm wrong, losses will be capped.
 
I will follow this strategy until early 2012 or when the market stabilizes, which every comes first.
 
For more on New Beginnings, check back every Sunday for a new segment.
This is not financial or investing advice. Please consult a professional advisor.

 Copyright © 2011 Achievement Catalyst, LLC