P1:OTA/XYZ P2:ABC FM JWBT161/Kee August16,2009 14:23 PrinterName:ToCome ii P1:OTA/XYZ P2:ABC FM JWBT161/Kee August16,2009 14:23 PrinterName:ToCome Buy and Hold Is Dead i P1:OTA/XYZ P2:ABC FM JWBT161/Kee August16,2009 14:23 PrinterName:ToCome ii P1:OTA/XYZ P2:ABC FM JWBT161/Kee August16,2009 14:23 PrinterName:ToCome Buy and Hold Is Dead How to Make Money and Control Risk in Any Market THOMAS H. KEE John Wiley & Sons, Inc. iii P1:OTA/XYZ P2:ABC FM JWBT161/Kee August16,2009 14:23 PrinterName:ToCome Copyright(cid:1)C 2010byThomasH.Kee.Allrightsreserved. PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey. PublishedsimultaneouslyinCanada. Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,or transmittedinanyformorbyanymeans,electronic,mechanical,photocopying, recording,scanning,orotherwise,exceptaspermittedunderSection107or108ofthe 1976UnitedStatesCopyrightAct,withouteitherthepriorwrittenpermissionofthe Publisher,orauthorizationthroughpaymentoftheappropriateper-copyfeetothe CopyrightClearanceCenter,Inc.,222RosewoodDrive,Danvers,MA01923, (978)750-8400,fax(978)646-8600,oronthewebatwww.copyright.com.Requeststo thePublisherforpermissionshouldbeaddressedtothePermissionsDepartment,John Wiley&Sons,Inc.,111RiverStreet,Hoboken,NJ07030,(201)748-6011, fax(201)748-6008,oronlineatwww.wiley.com/go/permissions. LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheir besteffortsinpreparingthisbook,theymakenorepresentationsorwarrantieswith respecttotheaccuracyorcompletenessofthecontentsofthisbookandspecifically disclaimanyimpliedwarrantiesofmerchantabilityorfitnessforaparticularpurpose.No warrantymaybecreatedorextendedbysalesrepresentativesorwrittensalesmaterials. Theadviceandstrategiescontainedhereinmaynotbesuitableforyoursituation.You shouldconsultwithaprofessionalwhereappropriate.Neitherthepublishernorauthor shallbeliableforanylossofprofitoranyothercommercialdamages,includingbutnot limitedtospecial,incidental,consequential,orotherdamages. Forgeneralinformationonourotherproductsandservicesorfortechnicalsupport, pleasecontactourCustomerCareDepartmentwithintheUnitedStatesat (800)762-2974,outsidetheUnitedStatesat(317)572-3993orfax(317)572-4002. Wileyalsopublishesitsbooksinavarietyofelectronicformats.Somecontentthat appearsinprintmaynotbeavailableinelectronicbooks.Formoreinformationabout Wileyproducts,visitourwebsiteatwww.wiley.com. LibraryofCongressCataloging-in-PublicationData: Kee,ThomasH. Buyandholdisdead:howtomakemoneyandcontrolriskinanymarket/ ThomasH.Kee. p. cm. Includesindex. ISBN978-0-470-45841-9(cloth) 1.Portfoliomanagement. 2.Riskmanagement. 3.Investments. I.Title. HG4529.5.K44 2010 332.6–dc22 2009021632 PrintedintheUnitedStatesofAmerica. 10 9 8 7 6 5 4 3 2 1 iv P1:OTA/XYZ P2:ABC FM JWBT161/Kee August16,2009 14:23 PrinterName:ToCome To Christie, who always helps me find my Comfort Zone. v P1:OTA/XYZ P2:ABC FM JWBT161/Kee August16,2009 14:23 PrinterName:ToCome vi P1:OTA/XYZ P2:ABC FM JWBT161/Kee August16,2009 14:23 PrinterName:ToCome Contents Preface ix Acknowledgments xv CHAPTER1 The Investment Rate 1 CHAPTER2 Keep It Simple, Sweetheart 11 CHAPTER3 Brackish Investors and Their Impending Doom 33 CHAPTER4 Golden Handcuffs 49 CHAPTER5 Since When Has Losing Less Become a Winning Strategy? 63 CHAPTER6 Redefining Balance 75 CHAPTER7 Contemporary Darwinism 81 CHAPTER8 A Proactive Aversion 91 CHAPTER9 Embracing Independence 105 CHAPTER10 Ahead of the Curve 121 CHAPTER11 2009: Return to Parity 137 CHAPTER12 Personal Balance Sheet 145 CHAPTER13 Every Day Is a Tuesday 153 CHAPTER14 The Game Plan 171 CHAPTER15 Oscillation Cycles 191 CHAPTER16 The Golden Sequence 213 CHAPTER17 Rule-Based Trading Strategies 233 CHAPTER18 Automated Trading 271 CHAPTER19 A Greater Depression 279 vii P1:OTA/XYZ P2:ABC FM JWBT161/Kee August16,2009 14:23 PrinterName:ToCome viii Contents FINALTHOUGHTS Welcome to the Comfort Zone 285 APPENDIX A Real-Life Example 287 AbouttheAuthor 293 Index 295