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Risk management and odds
- Thread starter NKNY
- Start date
A note on following conventional wisdom, yes, it does not work. If you were to read market news on The Street, or CBS Marketwatch, you'd be surprised how wrong they are in predicting market behavior, analyzing it, and giving us what they call 'guidance' and opinions as to what will happen next. The reality on trading is that its mostly a technical analysis based phenomenon and less based on fundamentals. Ideally, one must understand both. Around prior to April 4, 2001 when the telecom stocks plummeted, The Street.com said about CIEN something to the effect that even this great bull is facing slowdowns and not impervious to a bad economy.
A point to remember is that at the time JNPR hit 27, CIEN hit something in the low 30s, and with the addition of this news, it seemed like hell had been unleashed on Earth. If such a bull stock was no more, my god what would happen next, where would we all go, would we now stop day trading. As we find out, in terms of day trading only, CIEN and JNPR eventually went to 64 from that point on. And as of now, June 14, 2001, we seem to be in either a transitionary bull market or an actual bull market which we wont know until we're in the future and look back in hindsight.
On thing to remember, however, that all stocks that go down do not necessarily go back up. Lets remember AKAM, IWOV, NUAN, IWOV, AETH, and SCMR as well others who were high flying bulls and trading stocks a month or so before April 4, 2001, perhaps a temporary bottom.
Case in point, despite how grim it looks as it did in March and February when most of the trading stocks only yielded less a 2 point in the entire day on average, you can still make money as a trader, and thats what needs to be remembered. Thanks for reading.
A point to remember is that at the time JNPR hit 27, CIEN hit something in the low 30s, and with the addition of this news, it seemed like hell had been unleashed on Earth. If such a bull stock was no more, my god what would happen next, where would we all go, would we now stop day trading. As we find out, in terms of day trading only, CIEN and JNPR eventually went to 64 from that point on. And as of now, June 14, 2001, we seem to be in either a transitionary bull market or an actual bull market which we wont know until we're in the future and look back in hindsight.
On thing to remember, however, that all stocks that go down do not necessarily go back up. Lets remember AKAM, IWOV, NUAN, IWOV, AETH, and SCMR as well others who were high flying bulls and trading stocks a month or so before April 4, 2001, perhaps a temporary bottom.
Case in point, despite how grim it looks as it did in March and February when most of the trading stocks only yielded less a 2 point in the entire day on average, you can still make money as a trader, and thats what needs to be remembered. Thanks for reading.
Andrasnm
LOL. I am so far from being a cheerfull optimist, you would't believe. I am a European and as you probably know, we are genetically much more unhappy than Americans(in general). All my life I actually envied cheerfull optimimists, they are happier, get more of everything in life (incl. girls). I mentioned that because I think with positive attitude, it's easier to make it as a trader,( my opinion only).
LOL. I am so far from being a cheerfull optimist, you would't believe. I am a European and as you probably know, we are genetically much more unhappy than Americans(in general). All my life I actually envied cheerfull optimimists, they are happier, get more of everything in life (incl. girls). I mentioned that because I think with positive attitude, it's easier to make it as a trader,( my opinion only).
What do you guys think about future of day trading in general? Are there more or less individuals hoping to succeed in trading in recent months. I have been out of the trading for few months due to some other obligations.
Day trading is here to stay as long you dont marry yourself to a stock, a few stocks, or a sector. As long as you dont hold anything overnight. In other words, keep moving as yesterdays stocks are sometimes nowhere today. Thats putting it very simply in a nut shell. A perfect example of moving to better stocks is JNPR, and how lately it just isnt what it used to be. You can still trade it, but its performance has severly declined as a day trading stock. On the other hand, some new stocks are now taking over the slot of tradable, worthwhile stocks. Remember that a tradable stock has to move as many points as possible in a day, with decent volume and volatility. Some stocks that fit this bill are QLGC, NVDA, QCOM, and many others. In short, day trading has a future because the markets lately are very volatile, and thats what day trading is all about. For investors its a nightmare who reap rewards in a time frame of years, but for day traders, this is the promised land.
Zarrar,
I must disagree with your observation that "...a tradable stock has to move as many points as possible in a day, with decent volume and volatility".
I used to trade only volatile stocks like CIEN, CMVT, CHKP, JNPR, NVDA, etc. I use technical analysis, mainly support/resistance levels for my entry signals. I found that these highly volatile stocks offered very low odds for success. My feeling is that the market makers in these stocks purposely create fake setups on the charts because they know these are the darling stocks of most daytraders.
I've since switched to trading thinly traded (200k to 500k daily volume) stocks, mostly on the NYSE/AMEX. I've found that chart patterns are much more genuine and reliable in these stocks.
If I had know this when I first started trading, I would have saved myself a lot of $$$ and emotional distress. My advice to new traders is to avoid these high flyers, at least in the beginning. You don't need huge, multi-point moves intra-day to make money.
There's nothing wrong with taking 1/2 to 1 point on 500-2000 shares a day. That would give you a substantial income.
I must disagree with your observation that "...a tradable stock has to move as many points as possible in a day, with decent volume and volatility".
I used to trade only volatile stocks like CIEN, CMVT, CHKP, JNPR, NVDA, etc. I use technical analysis, mainly support/resistance levels for my entry signals. I found that these highly volatile stocks offered very low odds for success. My feeling is that the market makers in these stocks purposely create fake setups on the charts because they know these are the darling stocks of most daytraders.
I've since switched to trading thinly traded (200k to 500k daily volume) stocks, mostly on the NYSE/AMEX. I've found that chart patterns are much more genuine and reliable in these stocks.
If I had know this when I first started trading, I would have saved myself a lot of $$$ and emotional distress. My advice to new traders is to avoid these high flyers, at least in the beginning. You don't need huge, multi-point moves intra-day to make money.
There's nothing wrong with taking 1/2 to 1 point on 500-2000 shares a day. That would give you a substantial income.
mcgregor,
I agree with you entirely. I measure decent volume at 1 million or above, anything less could be hazardous. Having said this, high volume doesnt mean a very good tradable stock. Look at CSCO, its always at the top of the volume charts, but it offers very little point moves. I shoud reiterate that decent volume begins at 1M and not less, though some stocks are exceptions to the rule and it mostly depends on your trade size. The idea is to move in and out of a position without waiting for the execution because there isnt a buyer or a seller, thats where volume comes in. For the most part, any stock is tradable, but it depends on your objectives.
I agree with you entirely. I measure decent volume at 1 million or above, anything less could be hazardous. Having said this, high volume doesnt mean a very good tradable stock. Look at CSCO, its always at the top of the volume charts, but it offers very little point moves. I shoud reiterate that decent volume begins at 1M and not less, though some stocks are exceptions to the rule and it mostly depends on your trade size. The idea is to move in and out of a position without waiting for the execution because there isnt a buyer or a seller, thats where volume comes in. For the most part, any stock is tradable, but it depends on your objectives.