Keeping it Simple

[rs7]

Originally posted by daniel_m
Today was an absolute blast!

rs7, I haven't read your whole thread yet, I'll do it after I eat..but it's interesting to hear you say you let today's rally pass you by. I'm not sure what criteria you use for a pullback, cos the way I look it at, there a few good opportunities to get in today. Personally, I base the kind of pull back I'll accept on how "strong" I feel the initial move was. "STRONG" move, I'll settle for small pullback (like today). Then again, I was looking for an afternoon rally today - i'm not big on prediction, just one of those "feelings" kind of things.

Daniel, I understand what you mean. But I was at the gym, then had lunch, and it seemed like when I got back to my office I walked right into a giant run up. So for me, my timing was bad because I wasn't around early enough to build a position. If I had been there, when the market went from being down 100 to being unchanged, I would have gotten in at least a little. Especially since the nasdaq had been positive virtually all day.

PS: Daniel...you see todays post from the old "students..." thread re: Arafat being a billionaire? I put it in while waiting for the dip that never came

Best,
RS7

 

[profitz]

Originally posted by rs7

Bought banks, brokers and techs. Liked the drugs, buy they seem not to follow through (at least for me). I did not take shorts as a hedge. I know a lot of guys that take overnights go mixed. It seldom if ever works for me. I just go long or short. My hedge is how light or heavy I am. Today I would have been heavier if I had an entry point. I didn't, so I am light.

Thank you. Also...

When you do get your dip, can you explain your exit strategy/profit goal. For example, do you sell some or all if it gets back to the high or at some point higher? Assume it is a daytrade for this example.

 

[William]

RS7,

I am wondering why you don't like to buy when the stock is at its high of the day? I'm assuming it fits into some overall trading style of yours, so I am just trying to understand what exactly that is. Maybe what really attracts you is a nice risk : reward ratio, as opposed to waiting for direction to become a little more definite?

Nice thread, by the way.

 

[tampa]

...the more I read, the more I am reminded of the saying: You can fool some of the people some of the time, but you can't fool all of the people all of the time.

tampa
just one of the people...

 

[alain]

Originally posted by PuffyGums
http://www.wired.com/wired/archive/2.07/wall.st_pr.html

The story is about some rocket scientist type geeks who created a trading system. They are using it to trade for wealthy clients and are NOT selling it. If you have an edge, the opportunity is limited. If everyone traded that strategy the profit would evaporate. Trade it yourself, don't sell it.

PuffyGums has posted this in another thread and there is an interesting phrase in this article which I think is a good add to this thread:

<i>The hard part is keeping it simple. Says Farmer, "The more complex the problem is, the simpler the models that you end up having to use. It's easy to fit the data perfectly, but if you do that, you invariably end up just fitting to the flukes. The key is to generalize." </i>

Farmer from the "Prediction Company"

 

[larrybf]

ALAIN: A CLASSICpost regarding utilizing simplicity in real world trading. already posted in my daily review noted for constant reminder. thanks

 

[rs7]

Originally posted by profitz


Thank you. Also...

When you do get your dip, can you explain your exit strategy/profit goal. For example, do you sell some or all if it gets back to the high or at some point higher? Assume it is a daytrade for this example.

You know I kind of blew this whole thread to a degree by not clarifying that this momentum kind of trading with dips (bounces on shorts) really applies more to afternoon trading. In the morning, obviously it is tougher to see a trend, just because less time has passed, and there is generally a lot of choppy activity. Especially lately.

In the mornings, I will tend to fade an up open in a down market, or a down open in an up market....especially if the open is counter to the close the day before (down day followed by up open, etc.). These trades are quick and I do not build positions. I plan to be out of these trades within the first half hour of the day. But this is another topic. Sorry for the confusion. And obvious contradiction.


Now to address your question: Assuming a daytrade (being flat by the close), I generally just try to hold positions as long as possible. This means "simply" that I need a good reason to get out. Obviously losing trades. But with winners, I use what has been described somewhere on ET before as "mental trailing stops". Basically, I need to keep X% of my gain. This is a pretty subjective number, because every trade is different. The stock's behavior relative to the market, etc. Also, how much of an overall mark I am carrying in other positions. But I will do everything possible to prevent a winner from turning into a loser. A cardinal error!!!

I would keep a good position right up until the close if I wanted to be flat unless I had a reason to exit sooner.

rs7

 

[rs7]

Originally posted by William
RS7,

I am wondering why you don't like to buy when the stock is at its high of the day?

Nice thread, by the way.

First, thanks for the compliment!

I don't like to buy a stock at the high of the day....well it's more really a matter of not wanting to buy run ups. If the market is gently trending up (or down for shorts), I will nibble. And hope to slowly build a position. What I will not do is buy a stock if it makes a sudden dramatic move up. Or if the market spikes. Because experience has proven that a dramatic move is usually followed by a pull back (adjustment).

A great example was yesterday in LLY if anyone noticed. For some reason, it just suddenly dumped big time. Apparently on news that Bill Gates sold his stake. If anyone shorted the stock on that dramatic move, they would have gotten killed. I know some traders that specialize in looking for a move like that. But they would have been buyers. It is not particularly my style, because I like to keep it simple. I don't like to contra trade. But there is a fit there. Dramatic moves tend to reverse. At least to a degree.

I hope that answers the question. I will buy stocks on their highs. Just not on spikes up. Does this make sense?

Alains' posted link (a few posts back) is highly recommended. It speaks volumes for sure! I love the catching a baseball thing. It has appeared here more than a few times before. It applies to trading wonderfully. There is no substitute for experience. This is why I am such an adherent (especially for less experienced traders) to keep it as simple as possible. Buy strong stocks. Short weak stocks. Don't buck the trend. Keep doing this, and a feel will develop. This "feel" is like the instinct in catching a fly ball. Do it enough times, and you can generally know where the "ball" will end up. But even major leaguers misjudge on occasion. You will see them break the wrong way. And trading is a lot less predictable. But still, the more you do it, the more consistent you will be. But none of us will ever have a "gold glove fielding average" in trading (unfortunately). All we can do is try to always improve.

Good luck to all,
RS7

 

[alain]

Originally posted by rs7

I love the catching a baseball thing.

I think this is a wonderful example to show someone in real life how the "formulas" of trading have to be learned by experience. And models of trading have to be created in the brain to understand it partly.

By the way the article was written in 1994 i believe. Back then he mentioned that he will do the research on the stock market for about four years and then he will move to something else. This company still exists and works for the Swiss bank UBS Warburg Dillon Read. Well.. the markets have kept them busy little more than 4 years

alain

 

[rs7]

Originally posted by alain


I think this is a wonderful example to show someone in real life how the "formulas" of trading have to be learned by experience.
alain

How true!....now stop your flirting with Tanya, and we will be in total harmony!!!! I have enough to worry about with her and Don Bright. I need you getting involved in this love traingle like I need a third armpit.



RS7