I'm wondering if anyone on this board purposely limits themselves to just one or a few stocks to trade? At first I used to think that would limit your opportunities as opposed to scanning the market. Over the years I've met traders that continue to do well with this strategy (usually on NYSE). If you are one of these people would you mind answering: 1) Why you think this particular strategy works for you as opposed to the others out there? 2) What characteristics made you select the particular stock you did (you don't have to name the stock)? 3) Do you incorporate indicators to help you trade the stock or stick to reading the tape? Thanks.
I'm a Nasdaq trader (wanting to learn more about nyse) that makes more than 50% of my trades in the one stock, KLAC. In response to your questions: 1) My strategy doesn't require scanning the whole market to find setups, therefore, any one stock will do. I used to trade about 15-20 different stocks until I realised there wasn't any real benefit in it, so I just chose one. 2) It's valuation, $50+. Just makes it easier to get quick 20/30 cents than on a $10 stock. Plus it also has decent volume, 10mil a day. It generally moves with the Naz futures, and in fact, the way it is trading compared to nq forms a significant part of my strategy. 3) I use a 2min/5min chart with a couple of simple MAs and make most of my decisions from that, plus some level2 "reading". Daniel
I'm leaning more and more this way lately. Right now 80% of my trades, aside from openings, are in 4 stocks. I've known that this was a good technique, especially for newer traders, for some time, but also thought that I'd be limiting myself too much with it. Now that I've spent time doing it, I don't think that any more. The obvious advantage to it is learning how the specialist handles orders and moves his stock (nyse only). By watching a chart and the tape all day in one stock and keeping good notes, your eyes will eventually start to see a whole new level as to what's going on. You are going to be right more often and your losses will be smaller. As you get better, you can start trading bigger size and soon you are making more than you were scanning the whole market. But you are doing it with less preparation time, less risk and more confidence. I would start by watching a couple liquid, mid cap stocks that have a good daily range. You can also consider the sector they are in and how they are correlated to it and the futures and if there is another stock that you could add to make a pair. By watching two highly correlated stocks and learning their relationship, you've added another dimension to your game. I know one trader who has not traded any stock other than IBM in over two years. He's the best tape reader I've ever seen, but also looks at charts, stochastics, market stats and some other tech stocks. He alone accounted for 4% of IBM's total volume last year. He's scaled back his size a lot lately and is experimenting with more mechanical entries. He's the first to admit that IBM is not a good stock for this technique because it's notoriously hard to read, but he's been doing it so long now that he know's when the specialist is going to the restroom.
Do you guys who only trade 1 or 2 stocks often find yourselves overtrading? This would be my biggest fear. The market is really cranking and there is a huge seller in my stock(s) and I just keep chopping around trying to make something happen. Meanwhile you have spent a ton on commissions. Or maybe when your stock isn't doing much your are disciplined enough to sit on your hands? I focus on a handful of stocks everyday but those stocks change from day to day. I try and find stocks that are "in play" on that particular day and focus on those. That way I have a pretty good idea that these stocks have a good chance of decent intraday range.... Just my thoughts, Leland
I often trade just one or two stocks during the day. In the Nyse you begin to get a feel for the specialist and how he trades his stock. Each stock also has traders that regularly trade that stock with their own trading styles. These things combined create a stocks personality. Like a woman the more you are with that stock the better you get to know it.
If you define "overtrading" as taking trades when you don't really recognise any setups - no, it's not a problem for me. My style is to take 20-25 trades a day, but I wouldn't call it overtrading. If you consider "frequency of trades" as a variable in measuring profitability, my results suffer if I take less trades. Sitting out is pretty easy really. I found I used to "overtrade" a lot more when I traded more stocks, cos I'd always be looking for where the "action" is, and take trades to make sure I didn't "miss out" on any moves. I don't really care that much what goes on in other stocks anymore. For example, you could tell me ABCD just made a 1pt move based on one of my setups and I wouldn't really bat an eyelid. KLAC's moves are consistently some of the biggest out there, so I'm not really worried about missing anything. And if I do miss something, big deal. I'm a daytrader, the next opportunity is never far away. Daniel
On days that there is a lot of action in a stock (enron, cpn, dyn last fall, tyc early this year) I typically stop everything and trade those stocks. But on a day to day basis I trade a very small number of stocks patiently waiting for a good set up.........
As is probably obvious from my earlier post, I will trade the same stock until it no longer appeals to me. I trade 90% listed. Alot of the time I find that what was once a good stock will get too random for my trading style, and I'll ditch it and move on to something else. This happens about once every 1-2 months. Typically 75% of my trades will be in 3 or less stocks each day, but there's a basket of another 50 that I'll scalp for dimes and quarters. This probably would not happen as frequently if I was a better trader and was better at sorting smart vs. retail orders, but generally I'm too impatient/lazy for that. I trade stocks that appeal to my personality, and when a stock no longer agrees with me I break up with it and find a new honey.
I have traded the same stocks over and over for years now...occasionally I will throw one out and add a new one. I have just three main ones that I trade constantly...with a reserve list of no more than ten of them. I don't need indicators...the ones I have, I know so well that if they so much as wiggle I know why! I know everything and anything about them. I can tell you what kind of move to expect out of them, when they are going to make a move and what time of day it will happen. I can tell you what to expect out of my stocks during different climates of the market, whether trending up, down sideways or any which way. Most importantly I know why my stocks move other than the adage "Supply and Demand". I know what motivates them.