sector trading

Discussion in 'Strategy Development' started by yip1997, Nov 19, 2005.

  1. I am new to trading, but I like to learn about trading on a sector.

    In the last couple days, I started trading home builders. I observed the charts and they seemed to move in the same direction in almost the same time. They broke intraday newhighs together.

    I think there are several ways of trading a strong sector.

    When the group is strong ( by looking at the sector index or the prints of the stocks ),

    1. Buy the whole group together
    2. Buy the leaders
    3. Buy the laggards

    I tried (3) buy the laggards. When the leaders broke new high, and the laggards was still not in the new high but the trend was up, I brought the laggards.

    When the leaders struggled and seemed to top, I shorted the laggards.

    What do you think? What methods do you use for sector trading?
  2. split between the

    top stock and 2nd top stock

    never buy a laggard. Sort of like driving a hyundai instead of the porsche nearby.

    If you really think its too expensive, drive the bmw.
  3. "New to trading" and "trading the homebuilders" is a recipe for disaster. Learn by trading the less insane stocks first and, once consistent, venture off and trade the more volitile stocks.

  4. Good Thread hopefully it will lead to some good ideals.

    It seems to me that different stocks in each sector SHOULD move in some kind of relationship.

    What that relationship is exactly I do not know as each situation would be different.

    I think if you study a sector very carefully you will be able to see these relationships and find an edge.
  5. rkmalo1


    Although, I am pretty new to trading (started July 05'), I have had some success trading the Oils, HAL, XOM, and CVX, being my favorites, seem to move together. I also look at the $OSX, which is the major oil service sector index when making trades. HAL is my favorite, however, it took me a while to learn how to trade it ( Its pretty thin and volitile) ( SLB and OXY are a little beyond my skill level right now, but I am learning) CVX was one of the first stocks I traded, and I quickly learned that XOM and CVX and the $OSX moved in sync with one another, so as another new trader I would probably advise you not trade the homebuilders, yet. ( but if you still intend too you might want to look at the $HGX, (homebuilder index), most of them follow it and seems to me that DHI is one the easier ones to trade) You can still make decent money in the oils ( CVX), being the easiest, have the sector index to help you make good trades without taking all of the risk involved in the homebuilders.
  6. Steve,

    Thanks for your advice. Another experienced trader from my firm gave me the same advice. He told me to switch to oil service, or utility.

    My intention for this thread is to understand a general trading strategy for sector play. I don't intend to continue to play with home builders. They are crazy.

    How do you play sector?
  7. Rkmalo,

    Thanks. Where do you find all the index symbols?
  8. Personally I feel the homebuilders are less volatile then the oils, a good sho homebuilder stock to learn with would be Standard Pacific or even Toll brothers. The oil stocks like cvx and xom have too much volume to trade effectively, even halliburton has more volume then I care for.
  9. fatrat


    Haha, where were you when I was new and tried KBH?

    That stock kicked me pretty hard a few times. Don't need the uptick to short it either.