Getting in too early

Discussion in 'Trading' started by arzoo, Sep 6, 2002.

  1. arzoo


    I've been daytrading for a few months and have been slowly improving. I use 10-min charts and find short bases trade break out or break down following the nasdaq's movement.

    In trading the breakouts and breakdowns, I take whatever gains, not really going after big gainers if the market slows down, which has helped my keep some gains, although get out too early.

    I've noticed however, that in entering trades, whether short or long, I sometimes get in too early. Like for example csco, which broke 13.10 to cover the gap this morning. But after going to about 13.07, it returns to 13.13/13.14, which may or may not prompt a stop before moving down to 12.96 or so.

    This wasnt too good an example since the move back wasnt too sizable, but sometimes the break is correct but that one return move is enough to get you out. Am I getting in too early, or is my stop too close. I try to keep my stops at 1-1.5% to avoid big losses.
  2. trader99


    Yeah... I have some of the same problems sometimes. I noticed that I'm usually "right" on the direction but a lot of times a little "early" like you said, then I get "shaken out" because the move was too adverse.

    I'm not sure how one would go about solving it, but I guess there 2 ways:

    1) get in a little later? hehe. But if what is early and what's late? It's only obvious after the fact...

    2) Willing to hold for more wiggle room. That's wider stops?

    whaddaya think?

  3. bone

    bone ET Sponsor

    Just think about baseball.
  4. bone, can you elaborate please?
  5. arzoo


    You're right trader99, there are 2 ways, I just dont know which one. I know things like this fall under the 'subjective' topic and to each his own.

    I'm hoping that you guys who are a lot more experienced than I am have seen the pros and cons of going about it. And if there are any, indicators that may help.

    As of now, I'm basically trying to be more mechanical, although I kinda override that sometime when I think the market may be stronger/weaker than it is.
  6. JORGE


    I trade using a similar style and can assure you that the past week has been tough playing breaks on big cap NASDAQ stocks.
    CSCO had some confusing news on this morning which caused some whippy moves.

    You might want to look at some of the higher priced, more volatile NASDAQ names such as QLGC, KLAC, INTU, MXIM, AMGN, etc. You can be more patient playing the breaks on these because they normally trade back towards s/r before continuing their move. It helps to reduce position size in these stocks so that you can widen your stops.

    This has nothing to do with getting in early, but I have had my best success trading breaks on stocks which have had news either after hours or pre-market. Pay special attention to stocks which are making a significant move from the previous close. Wait for a small range to develop within the first few minutes after the open and then play the break. Sometimes you will get lucky and catch a .50-1, like CEFT on the break of 13 yesterday morning before you even have time to think of an exit point.

    I do not know how many positions you normally trade, but whenever I have more than 2-3 trades going at the same time I tend to be early on both entries and exits.

    Good luck.
  7. arzoo


    That's good advice Jorge. I hold 2-3 positions on average, like you, I feel it sometimes gets a bit confusing once I hold 5 or more issues. I just try to keep things managable.

    What time frame do you use?
  8. ddefina


    Analysis from Dr. Ruth
  9. if the stock is making a base, say trading from 13.10 to 13.30 and looks to breakdown.. maybe try to get in closer to 13.30, thats where your stop should be anyway.. i trade the es and nq now and going for breaks can really be frustrating if you wait to get in on the break.. its better to be already positioned earlier.. otherwise you get shaken out in the retest..

  10. arzoo

    Do you have statistics? What is your trade win/loss ratio. What is your gain/loss ratio?
    #10     Sep 7, 2002