I think risk managment is very important. It is hard to evaluate what you are doing based on the trades. We would also need to know account size, and what your risk mgmt strategy was for each trade, e.g. did you have profit and loss targets. For intraday trading, one way is to have profit and loss targets, e.g. EBAY @ 102.23, you think it will rise to 102.75, stop at 101.90. If you trade 1000 shares, you are risking $333 to possibly make $770. Some people have software automatically calculate profit and loss targets and enter limit orders to close the trade at those prices. If you use a mental stop, it is important to be diligent in taking the profits and esp. the losses.. Some people always takes the profits but don't take the loss or even average down on a loser which becomes a bigger loser and turn into into an 'investment'. The best way is to take the losses quick and let the profits run. After trading for awhile, you can analyze your trades to calculate your winning %, average gain in winning trades, average loss in losing trades.. If your average loss in losing trades is much greater than average gain in winning trades, then you've got a problem... Another way to measure risk is the % of capital you are allocating to each trade. If you have a 100k account, and you buy 1000 ebay @ 102, you are using over 100% of your capital on one trade. If this trade goes against you, the loss would be very significant. For intraday trading with specific profit and loss targets, it is risky. For a longer timeframe, e.g. swing trading, holding 1000 ebay in a 100k account is very risky. The longer the timeframe, the smaller each position should be in % of capital. When trading a particular stock, one has to consider the daily range / volatility of the stock. Trading 1000 of RIMM is much moire risky than trading 1000 MSFT even though both are about the same price $25 because RIMM is a much more volatile stock. If you are trading ETFs/index futures, you can increase the risk somewhat because these instruments are less risky than in individual stock. You also, should probably have a maximum position size, e.g. 1000. This is mainly an issue with lower priced stocks. I wouldn't recommend new traders buying 5K of WAVX or CHINA just because 5K is only 25k or 60k. Look at CHINA today! It opened around 13.50 and hit 9.50 intraday!! Great intraday trading action if you were on the right side; But a very risky stock. It is okay to increase the risk by adding more to a winning position as long as the stock is still attractive risk/reward at the current price. This works great on trending days when the market or a sector goes up all day or down all day. You can also trade around your position by selling pops and buying pullbacks. It helps to have a broker which charges per share, e.g. $1/100 shares if you use these stategies. For new traders it is helpful to stick to trading very active stocks / futures because there is more liquidity to enter and exit your positions.
I agree, you are getting raped on the commissions. Better to goto a direct access broker which charges per share, e.g. InteractiveBrokers charges 1c/share for up to 500 shares, and 0.5c for incremental shares above 500. For example, buy 500 shares cost $5, buy 1000 shares cost $7.50 Your commissions would have been $71 with InteractiveBrokers (all-in, no extra exchange or routing fees).
Fleance...thank you for the very knowledgeable post Do you recommend daytrade same stocks everyday...or go for stocks inplay
Just a comment, I don't understand how someone could short EXPE and long EBAY at the same time since those internet stocks tend to be correlated to one another... For a new trader, you are really playing the whole field buying/selling internet stocks (EBAY EXPE) one second, then retail (WMT), then financials (MER). Are you just trading based on technicals or is there some method to your madness?
I read charts...trying to find a momentum plays....example: if a stock goes from $22.50 to $23.10 and does it from 9:45 to 10:00(15 min)...and then goes lower from$23.10 to $23 from 10:00 to 10:45(45min) ..it means that buyers are in control (just my opinion) ...at this point I am looking to buy
From this, it sounds like you're trading based on your guage for strength, and then using market reversal times to enter positions. Do you use traditional technical analysis or candlestick charts to base your buy/sell decision, or is your trading totally based off the above-mentioned analysis? -FastTrader
My goal is to keep it simple (not to over analyse),I use candlestick charts , volume and bollinger bands
and limited trades. If you can risk only 1.8 and 1/4 and always have the patience to go for a $1 plus trades you made it. The problem is that it is not that simple to follow. You need discipline. You need to take the quarter losses and sweat when you have made 1/2 a point and it stalls goes to 3/8+ and back to 5/8+ on selling pressure....all fricking day. You know you not supposed to get out because you have a great position but then self-doubt creeps in and fear....and some greed..... Actually for me it always been easier to take those losses than sweat through the fricking manipulation and the yo yo of the daytrade. It is far better to automate a set up go for swing trades and DON'T WATCH the fricking tape all day it will drive you insane.
Ok, you wanted to know about limiting your DAILY loss, and it wasn't discussed so far. First of all, fleance had some very good points and I do hope that you have a predetermined target and stop-loss to all of your trades. This is the cornerstone of almost every risk management technique out there. This does not mean you canât change them once you are in a trade, after all, conditions change in the market and new conditions can change your target or stop-loss. With that you also want your profits to run as much as possible but not to the point the market will reverse and start chewing on your position. Stop-loss tends to be more firm, at least when considering increasing the possible loss. This same âsystemâ of target and stop-loss can be used on the daily performance as well. What I mean is, depending on how the day is going, you can determine what is the maximum amount you are allowed to lose today and what is the maximum profit you can squeeze out of it. That of course will depend on the type of day, some will be better for one kind of trading style and some to others. In any case, you will not want to loss more than a specified amount each day. That way you will always have a chance to try again tomorrow and not continue in a losing spiral. Just my two cents TM Trader
thankls for the data. I can see your risk limits from your exits on losses and how you trade on profitable trades as well. With what you use to monitor, volume will be you best friend for handling trades, both entry and exits. Before that, though, I would like to know how you got the short list to monitor for potential trades. In another thread someone suggested going long on SUNW, so I chimed in with suggesting he do HOV the next day. I wanted him to just see a stock from my short list that was going to break out. It did over 6% percent on it's first day break out. I am telling you this to give you an example so you can see that I can assess your method of how you focus on what arepotential money makers. I know from your data how you do risk management now. that can be fixedonce you are in a proper ball park to play.