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Price Action is the Only Action… Don’t Get Distracted

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Hi Michael. Dan in Boston here, hope you are well. I’ve been devouring your podcast after I heard you on the Stansberry podcast. Thanks so much for sharing all the info / state of mind, it’s F%$ing awesome!

Question for you regarding dividends. Will you ever hold a stock that’s trending downward because it’s throwing off solid dividends? I know you can’t talk individual stocks (assuming you can’t) so I’ll just say I bought a BDC that’s throwing off a monthly dividend, annual rate is over approx 12%. I’ve got a few other BDCs all throwing off similar dividends which are generally trading sideways but I’m up on a couple of them. Seems like they are a hidden jewel that nobody cares about. I bought them after the were dis-included from the Russell 2000 ETFs so I got ‘em at rock bottom prices.

I bought the one I’m referring to before I discovered and began to knuckle down into trend following. It’s trending downward but very slowly. My technical indicators are obviously negative but they aren’t screaming toward the bottom, just very slowly shaving off a few cents per day. I may of course hit my stop, however it’s only about 15 cents shy of my buy price, and the dividend is keeping me slightly ahead and reinvesting it I’m still in the green. I’m adjusting my stops to reflect that as well, so either way if I stop out I’m not gonna get hurt too badly, if at all.

Question is do you ever factor dividends into your trend following? I probably answered my own question as I’m still making money on the stock, but would love to have your feedback.

Keep up the great work man, I just finished chapter one of the Little Book of Trend Following and I’m sure within the next few months I will read all your books. I too believe people are sheep and freeloading off the system, I’m an entrepreneur anyway, so trend following is a natural extension of my life.

Cheers
Dan

Thanks Dan for the nice words! Let me keep it simple–judge the trade by price action always (not dividends). Holding onto a losing stock because it is spinning off a dividend is not trend following. Perhaps, the math works and it is ok for your situation, but it’s just not trend following.

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