Momentum Trading

Discussion in 'Strategy Development' started by Anunakki, Nov 23, 2006.

  1. How do you position size? Just $100k? No volatility or risk to stop sizing?

    Stops are 2% regardless of vol?

    Do you trail stops? Look into not trailing - may help you as allows some winners to run to end of day.
     
    #11     Nov 23, 2006
  2. For position size I simply try to get as close to $100k as possible. But thats why big volume at pre open is important to me. If its a $3 stock and volume is 100k shares at the point I want to buy it then no way am I going to try and buy 30,000 shares ( 1/10 the entire days volume so far ). I will settle for less shares or not buy in.

    Because Im only hoping for a minimum of 2% gains Im not going to bother with anything under the equivalent of $50k.

    My initial stop has to have a logical placement no more than 2% from where I bought in. If the next point of support is 3% below I still set my stop at 2% because I just cant afford more draw down than that. I try to find ones where its much less than 2%..1% or less... Iim just saying 2% is my max risk.

    You guys are mentioning a lot of things Ive never considered..such as " stops are 2% regardless of volume" ... Help me understand how those two factors correlate.

    Same with 'volatility or risk to stop sizing' ..im not familiar with that.

    I do my quick risk reward ratio of 3:1 in my head but thats about it .

    I had a long conversation with an aquaintence last night who has been successfully day trading for a living for years. He said that my ignorace to the minute details is helping me. He said he can sometimes get bogged down with too many indicators running through his head.

    I better get back to the 'family' before they see me on the net..lol

    happy turkey day everyone

    J
     
    #12     Nov 23, 2006
  3. sorry for my bad math :) I meant ( 1/3rd the entire days volume )
     
    #13     Nov 23, 2006
  4. Get a basic trading book. It is often helpful to use the same risk per trade - so can work your edges. Risk is risk to stop. e.g. if account is $100,000, and you want to risk 2% on a trade, then if the distance to your stop is 2%, you have to use the whole $100,000. If the distance to your stop is 4%, then use $50,000 (so still lose the same 2% of your account if you lose). This is what is meant by volatility (not volume) based sizing.
     
    #14     Nov 24, 2006
  5. How soon you think you can make 20%+ per day? :confused:
     
    #15     Nov 24, 2006
  6. I just started trading today, and made $580 after commissions. Since it was only a partial day, I can extrapolate that out to having made $1,160 for a full day. That would equal $5,800 per week.

    This trading is easy. I plan to quit my job next week and do it full time.

    note - this post may contain inaccuracies or falsehoods.
     
    #16     Nov 24, 2006
  7. Your "note" is correct that:

    Since you can earn $580 a day after spending only a few minutes (say 5 minutes) for the trading decisions and trades excution, that means potentially you could earn as much as $63,600 per day if working harder by trading say 10 hours each day (i.e. 600 minutes).

    Probably you should be able to retire much earlier than you think you could.

    note - this post too may contain inaccuracies or falsehoods.
     
    #17     Nov 24, 2006
  8. The shift frrom working full time to monitoring full time does give you several advantages.

    The 2% applies to every trading day regardless of market context. You are using a conservative percentage and that is fine.

    The switch you made from position trading to what you are doing now is going to create some habits that will be fairly limiting for you. Some are showing up already in your posts.

    Going from your prior approach to your present approach affords a range of opportunities.

    I would stick with preping the evening before and focus on getting more out of the oppotunity represented in your prior method.

    This, for you, is moreso a refinement of a proven method rather than reapplying it to day trading.

    The major areas to consider are:

    1. Stock selection.

    2. How to monitor to hold for the potential in the trade.

    3. Overnight considerations of the full time trader.

    4. Making capital available just in time for new opportunities.

    Some details:

    1. For using more than beginner capital, you need to emphasize quality a little more. Make the minimum volume of the stock traded in a day, ever, 200K shares. Skip looking at any stock under 10 dollars a share. Use 3 beta as you minumum for any stock you consider.

    2. Now you can use leading indicators of price more easily since you are monitoring real time data. It is important to not have incomplete data sets for doing analysis. You can use your former indicators as well as before, just shift to a faster fractal for viewing. You have some signals wrong at this point but that is not a big deal. Other correct signals will supplant these.

    Since you do look at volume, come to understand how it leads price. You stated that volume is a criteria for selection; it is also a criteria for continuing the hold longer. This will not be a mental challenge and the more you emphasize it the faster you will get up to speed. You can put your list in a table and compare the volume continually with the volume standard you have. I do it on Qcharts and it is just the creme rising to the top since I sort the table based on % of standard in real time. Here you will see shortly that 2% is too low a number by the first couple of hours of the day. It is several times that by the end of the day. A way to fast track this learning process is to watch an illustrated video (30 snapshots of the table) over and over as you listen to the narrative.

    3. People who trade to make money full time have many strategies. There are two that you can use to get acquainted with the overnight hold. And there is one daily phenomena that I will introduce you to. At 1:15pm everyday there is a main event. I sort of do it too because of capital considerations. You may notice that you are getting richer faster than you have heard about from others. It is something excellent traders consider everyday and they do it when big money is doing it (or slightly ahead of big money) It isn't the end of lunch that causes the afternoon activity to begin. for now google "reconciliation" and get your feet wet. To pick up on the two other things you need to get straight for overnight, google tradethemarkets.com and search for EOD and TRIN signals. you need to ride on through the evening as you have done before; just make the appraisals like Senter and Carter do for other instruments. You can do the same for any stocks.

    4. This is a combo type comment. Let's eliminate your getting stopped out by eliminating your lousy entries by getting you monitoring to work for entries. To make a long story short, there aremore places to be making money than you have money to apply to the opportunities. So stay in the opportunites by holding over and as the am begins, monitor the leading indicator of price and, only then make entires before price lifts off following the leading signal. You do this by putting the stock on the list of 2 above and then you watch the symbol go up the list to a % of standard level that gates the "buy" into consideration. since price does not lift off immediately, go get some money (sell your worst performer on the table of stocks you own). sort the owned list by % gain of price from prior close or % of standard volume, the order will be about the same either way.

    general comment.

    It turns out that a lot of success related things are very far away from the stop litany. you are using stops fairly intently and they occupy a lot of your thinking. There are about a dozen standard way to deploy stops. If you get straight portions of the four items above, you will have trouble even getting any stop you place hit. If a stop is hit it will just mean that you look at a list and apply the capital to something that is already under way in the direction of making money. By then most of your stop efforts will be to adjust them periodically to lock in profits as what you own trends toward more profits. You will usually notice that the trailing stop is well above the 2% per day profit slope by the time you need the capital to enter your next buy after the leading indicator of price signals you on the table.
     
    #18     Nov 24, 2006
  9. And where does this momentum come from?...

    it's not the 90's any more, and unless you're trading earnings, I dont see how you'll find these explosive stocks that will rise one or more points in a day.

    IMHO, momentum trading and impulse trading are VERY similar.

    The bottom line. If it works for you, do it, no matter what I or anyone says.

    cm69
     
    #19     Nov 24, 2006
  10. This is a fantastic post and appreciated.

    I screwed up today and lost a couple thousand bucks when I should have made a few thousand... all because for a moment I let my emotions affect my trading.
     
    #20     Nov 24, 2006