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Warren Buffett is a genius at buy and hold, and he also has some great quotes. When I first learned about him, I was really impressed. If you hold something long enough and you are really good at it, you can make a lot of money – which today still stands the test of time as a great investing strategy.

 

As I have gained more experience with investing, I also started to see how the realities of life play a vital role. For example, not everyone can afford to buy and hold a stock for the long term. So then what? Do we just say that investing in securities is not for you because a few smart people say that long-term investing is the ONLY way to go?

 

I simply didn’t believe that to be the case. While great investors like Warren Buffett have found great long-term strategies, why couldn’t we come up with some great short-term strategies as well?

 

I started to think about how to do this. With the variables in the markets that cause it to fluctuate in the short term, I realized that a fundamental approach was not wise.  Then I went back to my roots in college and began thinking about a mathematical approach that also utilizes fundamentals in a unique and compelling way.

 

Proficient in software development, I started to learn about quantitative trading – or more specifically how to use mathematical concepts to be successful in the markets. I started writing algorithms along with a set of rules that I follow to this day:

 

  • Sustainable: Design something that will stand the test of time and in any market condition.

 

  • Less is More: Write fewer algorithms and focus on maintaining and updating them as needed to continue to be successful.

 

  • Time Tested: Stringently time test all algorithms to ensure that they work.

 

  • Direction Doesn’t Matter: Allow the algorithm to determine the direction of the trade (long or short). Do not get caught up in building an algorithm that strictly moves in one direction or the other.

 

  • Repetitive: Ensure that the algorithm can run over and over with the end-result of profitability.

 

  • Protected: Protect all trades from excessive loss, and set intelligent limits on gains.

 

Several years later, with a successful business and a set of great algorithms, I am thrilled that I stuck to it and didn’t believe the nay-sayers. I look at all of the companies today that “disrupt” traditional approaches and feel right at home.

 


 

Gallup: According to a recent survey, just 54% of Americans invest in the market today and that's down 11% since the Great Recession.

A conclusion that can be drawn from the above is that a large percentage of Americans simply cannot afford or are hesitant to invest long-term in the markets. A viable and successful short-term strategy becomes the best and in many cases the only option.

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