Here is an informative video as to why you should use stops.
http://www.youtube.com/watch?v=kcvlIR9i3mU
http://www.youtube.com/watch?v=kcvlIR9i3mU
Developing a profitable strategy
- Thread starter mgabriel01
- Start date
A few thoughts to share with you.
- Determine a trend in BOTH the stock AND the market, and trade only in that direction. This isn't rocket science. Use an EMA of a decent length, and eyeball the charts of the stock and the S&P.
- Buy into a stock's weakness in an uptrend, and sell strength in a downtrend. In an uptrend, you will be looking for a sharp selloff as a good entry point as that is most likely to attract buyers. Imagine yourself owning the stock. Would you be throwing up at this point and selling in a panic? Good. It's time to buy. And in a downtrend, look for sharp rally that you can short. Over the past 90 days, there have been clear periods of strong market and stock uptrends, and downtrends. September, a great month to be buying weakness. October-November, an excellent time to be shorting any sign of strength. A super trading environment. The best in years. If the overall market is not in a clear uptrend or downtrend, then tread carefully and trade very small.
- You will find it very difficult to consistently profit without access to live intraday data, because that is where your best entries will appear. For example, a sharp selloff in an otherwise uptrending stock and market will often come and go in a matter of hours, sometimes minutes.
- Keep it simple. Your goal is to define short term price action in a larger context, and know how to work with it. You don't need a raft of technical indicators and books written by losers to learn how to do that.
- Always use stops, and never let a trade move very far against you. You will always have the option of re-entering later if you feel it's the right thing to do, but initially don't hesitate to pull the plug and move on.
- It has been said a million times, and I will say it again here. Cut your losers short and let your profits run as long as you can. If you don't, it is only a matter of time before you will be out of the game, because your winning trades must be big enough to overcome the many small losers. It is ALL a matter of statistical probabilities, and you need to put them in your favor.
- As a new trader, you have only one goal, and that is to survive your mistakes so that you can go on to the next trade.
Here are my first trades and some observations:
1) Determine a trend in BOTH the stock AND the market, and trade only in that direction. This isn't rocket science. Use an EMA of a decent length, and eyeball the charts of the stock and the S&P.
So I am using gut feel - but trading the trend on the stock and the market
2)Buy into a stock's weakness in an uptrend, and sell strength in a downtrend. In an uptrend, you will be looking for a sharp selloff as a good entry point as that is most likely to attract buyers. Imagine yourself owning the stock. Would you be throwing up at this point and selling in a panic? Good. It's time to buy. And in a downtrend, look for sharp rally that you can short. Over the past 90 days, there have been clear periods of strong market and stock uptrends, and downtrends. September, a great month to be buying weakness. October-November, an excellent time to be shorting any sign of strength. A super trading environment. The best in years. If the overall market is not in a clear uptrend or downtrend, then tread carefully and trade very small.
again. going on gut feel simply because I have not read enough yet to determine entry-exit points using a more quantitative method. (Takes time to read all this shit ya know!)
3) You will find it very difficult to consistently profit without access to live intraday data, because that is where your best entries will appear. For example, a sharp selloff in an otherwise uptrending stock and market will often come and go in a matter of hours, sometimes minutes.
Using TOS charts - to the minute ---- the charting tool is useful to learn patterns as well. This will take some time though
4) Keep it simple. Your goal is to define short term price action in a larger context, and know how to work with it. You don't need a raft of technical indicators and books written by losers to learn how to do that.
- Always use stops, and never let a trade move very far against you. You will always have the option of re-entering later if you feel it's the right thing to do, but initially don't hesitate to pull the plug and move on.
Simple Plan #1 is about as simple as it gets!
Thanks for the feedback
1) Determine a trend in BOTH the stock AND the market, and trade only in that direction. This isn't rocket science. Use an EMA of a decent length, and eyeball the charts of the stock and the S&P.
So I am using gut feel - but trading the trend on the stock and the market
2)Buy into a stock's weakness in an uptrend, and sell strength in a downtrend. In an uptrend, you will be looking for a sharp selloff as a good entry point as that is most likely to attract buyers. Imagine yourself owning the stock. Would you be throwing up at this point and selling in a panic? Good. It's time to buy. And in a downtrend, look for sharp rally that you can short. Over the past 90 days, there have been clear periods of strong market and stock uptrends, and downtrends. September, a great month to be buying weakness. October-November, an excellent time to be shorting any sign of strength. A super trading environment. The best in years. If the overall market is not in a clear uptrend or downtrend, then tread carefully and trade very small.
again. going on gut feel simply because I have not read enough yet to determine entry-exit points using a more quantitative method. (Takes time to read all this shit ya know!)
3) You will find it very difficult to consistently profit without access to live intraday data, because that is where your best entries will appear. For example, a sharp selloff in an otherwise uptrending stock and market will often come and go in a matter of hours, sometimes minutes.
Using TOS charts - to the minute ---- the charting tool is useful to learn patterns as well. This will take some time though
4) Keep it simple. Your goal is to define short term price action in a larger context, and know how to work with it. You don't need a raft of technical indicators and books written by losers to learn how to do that.
- Always use stops, and never let a trade move very far against you. You will always have the option of re-entering later if you feel it's the right thing to do, but initially don't hesitate to pull the plug and move on.
Simple Plan #1 is about as simple as it gets!
Thanks for the feedback
Something I have not seen discussed much yet (probably because I have not found the thread!) is trading range
In looking at a variety of charts - it appears to me one would want to find a stock (or some other instrument) that has a broad trading range -- say.. for example on a daily basis
For instance ---
ETFS (QQQQ, DIA) rarely have a price range of more than a couple points on any given day.
So if I want to take advantage of a move- especially without putting too much money ont he table - I want to find stocks (or some other instrument) that has a broader range
SPYders seem to have a broader range --- 3, 4, 5, 6 points a day
certain stocks - like GS, BSC (simply because I have been watching them) --- at the moment can easily swing 10 points in a day or more
So, is this reasoning sound?
Or am I missing something?
In looking at a variety of charts - it appears to me one would want to find a stock (or some other instrument) that has a broad trading range -- say.. for example on a daily basis
For instance ---
ETFS (QQQQ, DIA) rarely have a price range of more than a couple points on any given day.
So if I want to take advantage of a move- especially without putting too much money ont he table - I want to find stocks (or some other instrument) that has a broader range
SPYders seem to have a broader range --- 3, 4, 5, 6 points a day
certain stocks - like GS, BSC (simply because I have been watching them) --- at the moment can easily swing 10 points in a day or more
So, is this reasoning sound?
Or am I missing something?
To develop a profitable strategy???
Becoming very competent with backtesting trading models. Then becoming passive towards backtesting.
Basically, you have to test a lot of trading models to a point where you can figure out the results before running the tests... even though you test it just for the sake of it.
Serious reply.
Becoming very competent with backtesting trading models. Then becoming passive towards backtesting.
Basically, you have to test a lot of trading models to a point where you can figure out the results before running the tests... even though you test it just for the sake of it.
Serious reply.
lescor --- I should clarify that goal:
Goal - become profitable overall
Mindset: lose as little as possible on the losing trades
Expectation: 6 trades in 10 will be losers.
Conclusion: Risk Managment is one of the keys
Thanks for pointing out the inconsitency.
Every little bit helps!
Goal - become profitable overall
Mindset: lose as little as possible on the losing trades
Expectation: 6 trades in 10 will be losers.
Conclusion: Risk Managment is one of the keys
Thanks for pointing out the inconsitency.
Every little bit helps!
I would recommend that you begin with several call-write option positions where you purchase/sell strongly trending shares and sell the opposing option against them. While this in not necessarily a very aggressive program, it allows you a considerable margin of error and is a great way to experience the market's pricing of options in the face of time and volatility.
In addition, it is conceivable that you could round off several percent a month towards an account compounding program which will build principle quickly. This has a higher probability of a smaller success, and time can literally force a profit upon you should you be caught in a horizontal price environment.
Your risk aversion should be focused on opening gaps and an avoidance of major announcements.
happy trials...
In addition, it is conceivable that you could round off several percent a month towards an account compounding program which will build principle quickly. This has a higher probability of a smaller success, and time can literally force a profit upon you should you be caught in a horizontal price environment.
Your risk aversion should be focused on opening gaps and an avoidance of major announcements.
happy trials...