Anyone actually succeeding?

Discussion in 'Trading' started by TheFinn, Jan 8, 2001.

  1. fleance


    I was mainly a longterm investor in stocks like INTC AMAT SUNW ORCL AOL, but started daytrading aggresively in 1999.
    Initially, I was overconfident due to my 'edge' working in SiliconValley and having an excellent understanding of tech and the companies..

    Lessons I had to learn the hard way:

    1) Minimize Losses. If you only invested for longterm based on fundamentals, and viewed a drop in one of your portfolio companies as another buying opportunity, this will kill you if applied to shortterm trading. Generally, if you entered a trade for a shortterm gain, you should have a mental stop at which point you consider you're bet to be wrong, and take the loss. Taking the loss quickly limits your downside and frees up your capital to take another trade.

    2) Patience. A shortterm trader shouldn't feel they always have to be in the market. There are many opportunities every single day.

    3) Margin. Never ever use margin, except in *extremely* high reward / low risk situations, e.g. the day FOMC announced 50 bp rate cut! Get off margin as soon as the
    special situation is no longer present.

    4) Position sizing and Money management is very important to limit your risk. You should take into account the price and volatility of a stock when sizing a position. For example, a 200k account should not buy 1000 shares of JNPR at 130/share.

    5) Don't trade if you aren't mentally and physically prepared. If you have a streak of losing trades, it is best to watch more, and do less (fewer trades, lower lot size) until your confidence returns.

    Once I had learned these basic tenets, combined with my knowledge of technology companies, I was able to try different trading strategies like playing market swings,
    news plays, sympathy plays, IPOs, index rebalancing, etc. At the same time, it takes awhile to find a good broker(s) for shortterm trading, and to understand the ins and outs of marketmakers, order routing, etc.

    I initally tried to watch a few stocks and trade them, but I found that trying to scalp 1000 shares for 1/4 or 3/8 is a) very stressful b) limited downside but limited upside also c) commissions become a bigger factor. d) watching Level2 screens to game the marketmakers is difficult, and actually not that useful for very liquid bigcap tech stocks.

    Over time as I learned more and constructed a better trading platform (Ravenquote(QCharts/QFeed derivative), CyberX order entry + custom order entry application for basket orders routed to NDB and DLJ, running on PIII 850 MHz, 512 MB, DSL modem, 2 22" Mitsubish 2040u monitors running 1600x1200), I have developed a more opportunistic strategy.

    One my two monitors I have displayed 40 charts of the top bigcap tech stocks + particular stocks I am watching that day. This allows me to get an overall pulse of NASDAQ beyond what you see just from the index +/-.

    My favoriate and most lucrative play is buy a basket of stocks at a market bottom, esp. after a sharp drop, or when market moving news stories are released. For example, Friday Jan 12th, NASDAQ tested 2700 and then fell sharply almost back to 2600. A sharp bounce pulled the index back up 20-30 points. I bought about 20 stocks 500-1500 shares right around that bottom and made a nice gain.. Examples of market moving news would be the FOMC 50 bp rate cut a couple weeks ago, and the Bush-Gore FL supremet court and US supreme court decisions.

    I've learned that there are many opportunites every day, and rather than having your head stuck in the sand staring at a Level2 screen on one stock, it is better to be scanning the entire market, news, etc. for opportunities. The 'Very ShortTerm Down', 'Very Short Term Up', and 'Trade Rate' HotLists in QCharts are very useful for finding special situations.

    In general, I graviate to the stocks which are the most liquid and have large daily trading ranges. These stocks are the riskiest, but I try to look for low risk entry points. I usually don't use alot of indicators for my entry point; mainly the overal market, and price/volume patterns.

    In 1999 I had a large longterm and a small shotterm account so I could start trading. I returned about 120% which was good, but not great considering NASDAQ was up 80-90% that year! In 2000, I was very fortunate because I liquidated most of my longterm portfolio when NASDAQ hit 5000 and pulled back, and the huge up and down swings of 2000 was ideal for shortterm trading. I still can't believe it, but I made 1100% last year; Some of that was from that huge pop in Jan-Mar of 2000 and the rest is from daytrading. This year is already off to a great start, with the highlight being a +22% day when the FOMC lowered rates by 50bp.

    The best advice I can give is to read enough to get started, and then start trading small until you start becoming consistent. Start with max 20% of your working capital and with 100 share lots. Try to keep fixed and commission costs low, until you get a better handle on what works for you.


    #11     Jan 14, 2001
  2. I can't match all the percentage gains being bandied about, but I would anticipate a 7 figure yearly trading/scalping gain.

    #12     Jan 14, 2001
  3. Dustin


    I wanted to comment on one of Fleance's comments. He said <i>"...and rather than having your head stuck in the sand staring at a Level2 screen on one stock, it is better to be scanning the entire market, news, etc."</i>

    I really don't think this applies to everyone. I used to trade the market, QQQ's, IPO's, and anything else that moved. This method worked OK, but last June (of 2000) I decided to just focus on one stock. I just watch the nq's, spooz, and the one stock I trade. Since then I am up about 1000%.

    I would strongly recommend to beginners or anyone having trouble getting over that hump to profitability to just focus on one stock with the following traits:

    excellent ECN liquidity
    daily vol >8m
    moves in tandem with futures

    If you find a stock like this, there is NO reason imo to be trading the market, or baskets of stocks.

    #13     Jan 15, 2001
  4. I agree with Dustin.
    #14     Jan 15, 2001
  5. Ok guys, you are both right and wrong. Each person is an individual. I'm in disagreement with the margin post but that is me. I tend to use full margin when the market is heavily bullish and when in a drawdown cut back. There are many different ways to trade, both styles work. Just remember the golden rule
    "Cut your losses short and let profits run"
    #15     Jan 15, 2001
  6. margin is great, and to be used constantly. Just don't risk more than a third in any one stock, and NEVER be on margin into an overnight unless you are positive and then some. I think i have been margined out into an overnight about a half dozen times in the last year+
    #16     Jan 15, 2001
  7. P-

    I use margin for everything. In fact that's why I asked about 10-1 in a previous post.

    I agree with you/and disagree. For my position trading/swing trading I will use margin heavily when I'm in a winning streak. The key for margin is to understand trading. If you can out produce the return that you can borrow why not use it. You need to have a good understanding of your risk/reward ratios, expectancy, and a good understanding of your tolerance for risk to use it. I keep my portfolio heat though to no more than 15% Meaning if I was completely stopped out of all my positions at once /with no slippage I would have a 15% drawdown from current capital. This is also a combo of shorts and longs to help balance out risk. If you were completely long your risk would be even more, but I'm trying to keep everything simple. Risking this much is when I'm in a huge winning streak and I'll be risking a lot of the market's money. It's how I can do returns of triple digits by varying my risk. I risk no more than 6% on any given trade--usually only 1% though. Anyhow I LOVE margin

    #17     Jan 15, 2001
  8. tntneo

    tntneo Moderator

    I agree with Robert.

    If your system works with amount A, there is no reason it would not work with amount 2xA or whatever the margin is.

    This is really true with swings and multiple positions trading since you can spread the risk and have no position able to go against you too much..
    When daytrading with a single position active at a time, position sizing may force stricter use [or no use] of margin.

    Beside this case, I think margin is your friend when you have a clear idea of how your system behaves.
    #18     Jan 15, 2001
  9. Carl J

    Carl J

    I like your style of trading.
    Could you name some stocks that meet your criteria?
    What's your favorite ECN?
    #19     Jan 15, 2001
  10. Dustin


    A few of stocks that fit that criteria are JNPR, CIEN, PMCS (although PMCS is light on the ECN side).

    My ECN preference goes like this:

    You can email me with other comments at

    #20     Jan 15, 2001