How do you determine the "strongest of the strong" and the "weakest of the weak"? Relative-strength? 1-day relative strength? 1-week relative strength?
I use moving averages. Plus other things for confirmation. If you look at a chart and the stock goes up, up and up. Then it pulls back and then goes up, up, and up again. I consider that a strong stock. I say to myself, "who am I to get in front of that"? So, when a buying opportunity comes, I predefine my risk. I Make sure that the maximum expected loss is worth risking for the potential minimum profit possibility. I'll start my first scale out at the minimum profit potential area. If the trade stalls and the circumstances change I will get out earlier. I will always play towards the safe side. I also have a rock hard stop, which is the most that I am will to lose on the trade. (that amount is the same as my maximum expected loss as I described above). If it trades there, I'm out no matter what. I call that my back-up parachute. If for some reason my regular parachute doesn't get me out, the back-up parachute surely will. I don't mind losing money, that's part of the job. However, I do not want to lose money as a result of me doing something stupid or reckless. I do not want to say to myself, "Come on gotta_trade, you should have known better". So, I'm going to stick to my discipline and hopefully it will work out. I hope I answered your question.
I qualify my trades using the daily. I narrow them down with the weekly. And I use the hourly as a trigger for entry. I'm just trying to find high probability trades, with minimal risk. I'm not looking to fight the market. I'm just going with the flow. And if I lose, that's okay. (i'm willing to take that risk) It's a very simple concept as long as we don't let fear and greed get in our way.
after filtering your trades into that category, you probably end up with low Beta stocks, which produce low returns. I noticed that you're not doing size, hence, not getting much bang for the effort/buck. Is this intentional, or conversational, and the actual position size produces more P&L than stated? Are you propritary or retail? Leveraged trading using this method would grind your account down to nothingness in short order because of the seat costs, fixed and variable costs and other such issues. In short, imho, you need to ramp up size soon or this effort might more appropriately approach the "hobby level" instead of serious trading levels.
I'm a daytrader. I am a pretty active daytrader, so I'm paying relatively low commissions. Yes, you are right, I do need to ramp up size. But first I need to see if this method will hold it's own. So, for now, I'll play small size. If this method proves to be profitable, I won't hesitate to increase my position size. I have been daytrading full-time for 9 years now. I have always made money, sometimes alot and sometimes a little. But, I have learned that it is not good to take foolish risks. It would be foolish for me to beef up my swingtrade position size at this stage. (I've only been swing trading for 7 days) If I was playing big size, fear and greed would get in the way, and I would surely lose. I'm very interested and exited about swingtrading. I hope it works out.
EOD: Thursday, June 5, 2003 NOTE: POG had a stock split today. So, I am now long 250 shares at 31.40 TODAY'S TRADES: Bot 300 PSS 14.10...................(PSS gapped down on bearish news, covered 300 shares. Still short 200 shares) Bot 200 MCY 46.59..................(new position) OPEN POSITIONS: 5/29/03..... SS... 200 PSS @ 14.83...... + .93 5/30/03..... B..... 250 POG @ 31.40...... + 1.04 5/30/03..... B..... 300 ESV @ 29.85...... - .31 5/30/03..... SS... 300 HEW @ 22.76..... -.29 5/30/03..... B..... 100 EVG @ 53.25...... + 2.65 6/02/03......B......300 FR @ 30.45........ +.57 6/05/03......B......200 MCY @ 46.59....... - .06 Unrealized P&L................................. + $690.00 Realized P&L...(as of 6/1/03)...............+ $552.00 TOTAL P&L REALIZED AND UNREALIZED..........................+ $1,242..00
EOD: Friday, June 6, 2003 TODAY'S TRADES: Sold 100 FR 31.40...................(scaled out of 100 shares, realized .95 profit, still long 200) Sold 100 EVG 56.47..................(last scale out with $3.22 profit, closed position) OPEN POSITIONS: 5/29/03..... SS... 200 PSS @ 14.83...... + .69 5/30/03..... B..... 250 POG @ 31.40...... + .37 5/30/03..... B..... 300 ESV @ 29.85...... - .60 5/30/03..... SS... 300 HEW @ 22.76..... -.41 6/02/03......B......300 FR @ 30.45........ +.1.32 6/05/03......B......200 MCY @ 46.59.......- .56 Unrealized P&L................................. + $79.00 Realized P&L...(as of 6/1/03)...............+ $969.00 TOTAL P&L REALIZED AND UNREALIZED..........................+ $1,041..00
I just noticed that there is an error in today's journal. I am now long 200 shares of FR not 300. 6/02/03......B......200 FR @ 30.45........ +.1.32 The P&L amounts are correct. I just forgot to change the share number. Have a good weekend everyone, gotta_trade