How to Handle the Current Whipsaw Market

Discussion in 'Trading' started by mgregor, Mar 1, 2001.

  1. mgregor


    I'd like some feedback from you seasoned traders on how to handle being shaken out of your position, then seeing the stock rally without you on board.

    I know what everyone says, you can always buy it back. True, however, you can rarely buy it back at a strategic level close to a logical support level.

    So let's say you bought your favorite stock right around an established intraday support level. You set your stop loss order about 1/8 to 1/4 below the support level, risking about $1 - $1 1/2. Your goal is to make $3+...

    Then the stock breaks the support level by 3/8 to 3/4 and rallies up $3 - $5.

    Even worse, sometimes you get shaken out twice by the same stock, and then watch it rally. Do you experienced traders have any limit on how many chances to give a stock before you give up. It seems that it always rallies just when you call it quits.

    I've been thinking that maybe it's better to place a limit order about 1/8 to 1/4 above your support level and catch the stock on the way down. I know this is like catching a falling knife, but this way, if you get filled, you can give the stock more wiggle room, while risking the same amount ($1-$1 1/2).

    Just for clarification, I'm referring to support levels that are established from looking at a 10-20 day 5 minute chart.

    My current strategy is to wait until the stock drops within 3/4 of its support. Then I look for the stock to have a positive close on its 5 min. intraday bar. If the $COMPX also closes positive, I then enter a limit order to buy the stock at the closing price of the positive bar.

    I usually risk $1 - $1.5 on each trade with 100-300 shares being bought. When the stock trades up to my initial amount risked, I sell half my position and move my stop to breakeven on the remaining shares.

    I usually place my stop loss order 1/8 below the established support level. I was thinking that if I were to buy the stock on a limit order right above support that I could afford to give it some more wiggle room, while risking the same amount of money.

    What do you guys think is best from your past experience?

  2. don't place stop orders if you are watching.. do it mentally!!! secondly, mm's and specialists know where you place those stops, they blow you out on purpose. keep your stops looser. Risk less shares if it means that. Otherwise buy when the specialist is buying. I don't know how to see this on the otc as well, but on the nyse, you can always tell when they'll tank it to get longer... that's when you double (tripple) up, and enjoy the ride. Daytrading is about anticipating.
  3. I wait till the odds are in my favor. That's it. If not I don't trade. Lately not as many opportunities but times will change

  4. Pretorian, when they tank it to get longer will I see a limited number of down bars? The reason I ask is when I'm watching a stock that is moving lower on somewhat bad news I notice it often goes down gradually and then drops for like 4 or 5 bigger red bars... levels off for 2 bars or so then starts back up. I see it daily. Is this someone "tanking it" purposely?

    I'm trading these on paper and doing very well. I'd like to be confident in knowing what's happening in these reversals.