Looking For Bearings - Nutshell Strategy

Discussion in 'Trading' started by mockingbird, Nov 7, 2001.

  1. Greetings to the forum members from this newbie looking for a little advice.

    I am a computer programmer of 15 years. I have tried a little daytrading, using Datek and Tradestation Pro, lost a little bit of money.

    I also have done some papertrading using Synergy's demo software (20 min. delayed quotes) and lost tons of pretend money.

    I have read a few books, but they seem to mix information about daytrading with information about swing and position trading, which I find confusing.

    What I want to do is to go with a retail firm such Synergy, start with a 25,000 dollar account, make about 200 a day, with no positions ever, ever, ever held overnight.

    Am I out of my mind?

    If not, what is my nutshell strategy? I am picturing this: trade a single stock all the time, play resistance and support, look for the indicators, run the winners, cut the losers, clear about 200 a day.

    What would be a good stock to trade? I am picturing some high volume liquid NASDAQ such as CSCO, SUNW, or INTC. What indicators do I need to be looking at, with what parameters? I am picturing no more than maybe 3 or 4 indicators at most.

    Again, I have read the books but, I have been unable to pare down the wealth of information there into a simple strategy that I can follow mechanically. I can't seem to find any indicators that are actually useful. Further, the stocks don't seem to run much anymore, they seem to porpoise up and down and I just end up getting jiggled out and can't find a trend. I am overtrading because of so many short moves in the stocks. I am cutting the losers, but there are so few winners and so many losers that I still end up way down at the end of the day.

    Also - Synergy's demo software basically lets me go short at any time. Isn't this unrealistic to expect?

    So, can anyone offer a nutshell strategy that I could try papertrading with, to see if I can get a handle on this? I am thinking along the lines of:

    1) Goals - 25,000 account / 200.00 a day -- unrealistic? What is more realistic?

    2) One stock (which one) / many stocks?

    3) Screening software necessary?

    4) Indicators - trend - support - resistance - how to see it?

    5) Time frame - is this just the wrong time to trade? Economy / time of year / market epoch -- are stock behaving now in a way that makes trading impossible?

    6) How much drawdown to expect?

    Well, sorry for this obnoxious long clueless message - just looking for a starting point - it's not that I can't find any information, it's that I am finding way too much information. Can anyone boil it down for me just as a starting point?

  2. hehe.. better than losing tons of real money. :)
  3. jsmith


    Since nobody has answered your questions, I will give it a shot.

    1) Goals - 25,000 account / 200.00 a day -- unrealistic? What is more realistic?

    $200 is about a 1% goal per day from your trading capital.
    This is a reasonable percentage considering the size of
    your account if you have a good trading plan. I know a
    few traders that are consistently making $400-500 with
    50k of capital.

    2) One stock (which one) / many stocks?

    You can make money trading one stock or many stocks.
    There are many successful traders doing both but the
    key is they have strict money management and well
    developed trading plans. I read this in another thread,
    NVDA and AMAT are good stocks that follow the market
    with a high Beta. I would avoid NVDA until you have
    more experience because it has wide spreads and
    will run over you if you are wrong.

    3) Screening software necessary?

    This depends on your trading plans. If you are trading
    only one stock, there is no point in getting a scanner.
    Screening software is mainly used for spotting good buying
    patterns in hundreds of stocks at a time and alert you.
    A good example would be Tony Oz's setups you can read
    about in some of the other threads.

    4) Indicators - trend - support - resistance - how to see it?

    This something you get better with experience. There are
    many ways to interpret the same chart. Things may also
    look different depending on the timeframe. Trade in the
    direction of the market and wait for pullbacks to support
    levels for lowest risk entries.

    5) Time frame - is this just the wrong time to trade? Economy / time of year / market epoch -- are stock behaving now in a way that makes trading impossible?

    Market goes up, you can make money.
    Market goes down, you can make money.
    You should not have problems making money in this
    market unless it doesn't move. It isn't as easy as it
    was during the great bull run but this market is still
    tradable. If you can make money now, you will be
    very successfull later on when the market picks up.

    6) How much drawdown to expect?

    Depends on your system. I would recommend reading
    "Financial Freedom Through Electronic Day Trading"
    by Van K. Tharp
    He covers all these topics in great details.

    Make sure trading is something you really love and want
    to do or you are better off letting someone good trade
    your capital and doing something you really do love.

  4. I think you'll need more than $25k if you want to daytrade. That is the minimum, so if you lose anything at all you won't be able to daytrade. I don't want to sound negative, but few are successful right off the mark in this game.

    Making $200 a day doesn't sound like much, but few daytraders can do it on any size account, much less a $25k one. That's why the failure rate is 90% or so.

    The best advice I can give you at this point is trade small, worry more about losses than what you make and don't ever let a loss get beyond your pre-determined exit point.
  5. ANd don't trade using a $19.95 per side broker. YOu will get crushed by commissions. You need to trade light at first 100 shares max. Lots more to add but no time to write now.
  6. white


    DATTrader is right, go with a pro firm if you can. The commission structure is much better. I use to trade with a retail daytrading firm and was right 72.5% of the time, but do to high commissions I just kept running in place. As for shorting anytime you want, you can with a pro firm by using bullets. There are some draw backs to a pro firm, look at the postings under pro firms. I hope this helps.

  7. someone please explain what bullets are. if i can't short on an uptick, why should a professional be able to? correct me if i'm wrong..
  8. Magna

    Magna Administrator

    Professional traders are not subject to Regulation T. They can short on a downtick. They can short a <$5 stock as long as thier brokers can borrow the stocks.

    Everything you said above is true except the part about shorting on downticks. Specialists and Market Makers are authorized to do so on the stocks they make markets in, but Professionals can't directly short on a downtick. That is, they must use bullets which are provided by their firm (who's software executes a married put behind the scenes). If they don't take out a bullet on a particular stock, then they can't short it on a downtick. They can still short, but at that point they are like the rest of us lowly retail.
  9. magna,

    yeah you are right. I forget to mention, professional have to use bullets.
    #10     Nov 8, 2001