“Am I to assume that you‘ll use no stop-loss orders to reduce trade risks?” Mr. Okereke sneered. “After you buy the stock, what is the lowest price you are willing to sell at? How much are you willing to lose if this trade goes bad? Fifty percent, seventy percent or everything?”
“Let‘s look at it this way, why would I need to sell the stock if the price rises and continues to rise? It seems you‘re among the sedate traders that set a specific goal, once you get your peanuts gain, you automatically sell…” Mr. Odusote had stood up again.
“Gentlemen please,” Edward tried to calm things down. “Mr. Odusote, let‘s look at this from another angle. What will you do if the stock price does not move at all after you buy? Sell it and move on, or hold it and wait for action? This may require more capital than we can spare.”
“Some traders hold on to the stock until more activity and volume pick up.” Mr. Odusote speared a glance to his adversary. “They feel safe waiting it out, hanging on to several non-moving stock just because they seem to have some good value. I will not do that. I‘ll sell any stock that does not move after very short timeframes; maybe minutes, hours, and at the most a couple days. I like to move my money to shift active and lucrative stocks to my portfolio. With this very short turnover, we‘ll reap very good returns. I know equity markets can be volatile over the short-term and thus increases business risk but I have a solution. We‘ll start a large credit line from the banks; buy stocks with these loans and also use them as collateral for more.”
He paused and looked around and Edward realized how uncomfortable he was with this margin trading mantra. He knew hedge funds depended on no specific strategy but the ability of their managers to sniff out best opportunities while others were still unaware of them. What he didn‘t know was if the market was that diversified yet and whether Mr. Odusote was astute enough to succeed. Also, he usually
preferred to plan his business moves ahead and keep gambles to a minimum. He looked up when Mr. Ogunnaike spoke.
“Don‘t you think we‘ll get in trouble with this margin trading, if not with the Securities and Exchange Commission then with our shareholders? The haphazard approach you propose in trading the Fund can put their hard earned money at risk. Our current strategy utilizes screenings, news, research, technical indicators and fundamental analysis. It is essentially long term investment which is not meant to become rich overnight. I see that‘s what you plan here.”