Highly selective trading

Discussion in 'Trading' started by illiquid, Jun 14, 2002.

  1. Curious, anyone out there watch the market on a daily basis yet only trade the 10 or so times a year that we get these kinds of panic intermediate bottoms/tops? Been trading for about 5 years now, and certain days (like today) just stick out in terms of relative risk/reward. A daytrader account with 4x1 bp could have made 40%+ in a few hours this morning with relatively tight stops. Do this a few times a year and that's quite a hefty return for so limited duration of risk. Obviously its not that easy, but is the issue just one of patience? Or, is it only that because one were constantly trading daily that he or she would be sharp enough to determine oversold/overbought conditions?

    Has anyone here tried to maintain extremely high selectivity on trading triggers, and if so, care to share ideas? I know that for me, having realtick open in front of my face every market hour doesn't help my patience, but it seems to be the only way I can get that "gut" feeling that the market has hit a certain extreme level. I am quite sure that if I went over my entire trading history, I've probably made 50% or more of my total profits on the 30 or so days like today over the past five years. Any thoughts on subject?
  2. rmodasia


    I remember from market wizards, a guy named Mark D Cook who does exactly that using options. Great strategy, fading the extreme event (provided they occur often enough) .When implemented with discipline, can never blow up.
  3. Mike777


    Right, the same for me. If I stuck to the 1 or 2 days per month that the market is in high momentum mode, I would make much more money.
    I'm looking at that now.
    I know a trader who only puts on 2 or 3 big trades pa and his returns are awesome.
  4. P2 does it too...only i think he does it more than a few times a year...
  5. Vienna


    Would be an interesting thing to do with index futures only and not individual stocks: Trade 1 instrument only, and only a few times per year- beautiful, if one could make it work...:)
  6. This is a powerfull argument against both buy and hold ( pray ) and constant daytrading ( self churning ).
  7. Mike777


    Yes it is.

    I think there is a difference between buy and hold and selective market attacks. EG. If you place long dated option trades when the VIX is at yearly extremes then you would make money. I'm trying to back test this now, although I know it intuitivley.

    For me, I have churned my way back out of several major profit moves over the following several months.

    Different strokes for different folks I guess.:p
  8. I suspect that's more difficult than it sounds. Those types of extreme events are also very risky. The markets can stay irrational much longer than I can afford to wait or hang on. These things always look easier after the fact. Few have the courage to buy e.g. ES at 7 this morning when there were 50 sellers for each buyer.

    My personal taste is to make many smaller profits/losses and be happy whenever extra good days come around.
  9. Yes there are some big dogs who keep their money in TBills then jump in a few times a year. They have to be able to capitalize on the few moves or they end up just earning a TBill rate. The risk of getting ground down by the day in day out is not there because they are flat most of the time.
  10. As an editorial, the range today on the S&P is about 25 points, and if you include the gap we are just over 31 points (they hardly stand out on a daily graph). Today "feels" like an event type day but the range doesn't look like an event type range.
    #10     Jun 14, 2002