Budge wrote: ↑Mon Sep 06, 2021 11:13 am
I'd be interested in your returns from this method. Do you keep track of it separately?
BAFFAW has been a profitable strategy for me in aggregate, over the years. Naturally, any strategy or tactic needs to be refined and improved over time.
BAFFAW tends to work the best when the following conditions are met:
-highly volatile, small cap stocks, where the primary trend/narrative is up (i.e. biotech, A.I., man-made climate change, China, cryptos, nuclear energy, etc.);
-you don't take traditional fundamental analyses or technical analyses too seriously when applying BAFFAW;
-you don't use firm stops;
-you accept that there will be lots of market manipulation, "pump and dump," etc. - the whole idea of BAFFAW is that when applied well, it neutralizes all of the aforementioned to some extent;
-you are patient (you may need to wait months to years to profit), and disciplined with your exit strategy ("Triad or Quad" exits);
-the exit strategy, which I monikered the "Triad Exit" strategy, is to exit the position in at least three lots (you may also exit in four lots, called the "Quad Exit" strategy; this may be modified according to the stock and/or market conditions, but the primary compelling reasons for the multiple exit points are as follows:
2) the 1st exit point (you sell 25% to 33% of the established position) is to take minor profits and to de-risk your position;
3) the 2nd exit point is to take more profits, and by this point, you in a sense have completely de-risked the position (i.e. your profits at this point will have covered your cost basis);
4) the 3rd +/- 4th exit points is to do the whole "let your winners run" thing;
BAFFAW works best for experienced, disciplined investors who are used to high volatility and won't panic sell (nor panic buy). Also, FDG (Falling Dagger Gambit) may be combined with BAFFAW in various ways for even greater profit.
You'll miss some upside with BAFFAW, of course, as you pointed out, but you'll also avoid downside, especially with the type of stocks for which BAFFAW is designed. For example, let's say stock A spikes up, but the investor gets greedy and doesn't carry out the first exit sell - then the stock falls back down, and keeps going down. So with BAFFAW you potentially lose some upside but it helps you avoid a lot of downside (i.e. avoiding the "dump" part of the "pump and dump" that is often seen in these small cap stocks).
I've used it sparingly over the years, and it's always been profitable. Sometimes you make a nice profit over all the exit points of the Triad Exit or Quad Exit, and yet the stock continues to soar higher. So you do need to learn to not feel bad when that happens.
Currently, I have been using it on ATBPF (as discussed in the TB forum) - accumulating small lots when the price drops below $1. I am 70% sure it's an $8-10 stock given a "breathing room" of 3 - 5 years. The rest is basically just noise.
