OriginalQuestion: How often, or do you ever get to 100% cash when the market starts to roll over? Or do you just switch to short positions instead? (e.g. selling the previous leaders)
Well, I often go to almost 100% rather quickly when things get ugly. I quickly part ways with recent trades in order to have a more easy time to hold onto the longer term position trades (Position trades typically make up between 20 to 50% of my overall equity. However before things get ugly I oftentimes try to catch a climax move short sale in one or maybe two prior leaders. Other than that I rarely short the intial breaks off the highs but rather wait for shortable weak rallies into major resistance level after such breaks (A very good timing technique I adopted from Gil). Currently (Jan 2021) many big stocks are trapped in volatile topping formations ($MSFT $AMZN just to name two). Here I would short right away when I see weakness in the form of meaningful bearish price and volume clues. Being both long and short happens quite often in such an environment. I don’t see this as hedging in the classical sense but rather seizing opportunity in both directions when the market underlying direction is not clear yet.
In 2020 I had several weeks where I was in 100% cash waiting for proper setups. I actually was in cash for the majority of the crash. Typically I am in cash for a couple weeks each year as I wait for proper setups to emerge.
How do you decide when to be fully invested and when to keep some cash?
How would you increase exposure coming from cash and managing a large portfolio?