why not a stop loss near the top of the gap... if you get stopped out you still profit, and dont have to watch it potentially fill the gap and continue lower for a loss?
The advantage of paper trading is you should be able to do it without getting emotionally wrapped up by what happens to it. View it dispassionately, it isn't real money. Try more than one portfolio, use different and even opposite strategies in each. I don't think QQQ is going to go back to October's levels. You could very well just hold onto this portfolio without doing anything in it for the next month, and end up with more of a profit than trying to tinker with it every day. I may be dead wrong, but I still expect the market to rise over the next 6 weeks. Has there ever been a year in which it didn't rise from Thanksgiving to Christmas?
Don't change your plan midstream. You've defined what "being wrong" will mean so allow the market to do what it does. And, yes, you can go broke taking profits. Consider, however, that at this point you may be justified in at least moving your stop to breakeven. In this way, you won't be setting yourself up for allowing a profit to turn into a loss, which would throw you off even further. You're going to be twisting between giving price room and running the risk of price coming all the way back to your stop, and maintaining a very tight trailing stop so that you can get the most out of your trade while running the risk of watching price resume its trend immediately after you've exited your position. There are at least two ways to avoid this conflict. One is simply to decide whether you're going to leave it alone or squeeze it for every possible tick. Another is to sell half your shares with a tight trailing stop, or even at arrival at a predetermined price target such as, in this case, filling a gap, then hold the remainder of your shares at a breakeven stop. In this way, no matter what price does, you're able to take advantage of it. --Db
Wednesday, November 20, 2002 I appreciate all the feedbacks and advices. It makes me feel less like I am doing this alone. Thanks guys! Volume: The market has gotten me very confused. In the intermediate term, it is showing me an uptrend, telling me to go long, but in the short-term, the downtrend I saw was hinting me to go short. Today, the market went up and I donât even know which way it is going anymore. Since I am only swing trading, I am going to do my best to follow the intermediate trend and ignore the short-term noises. If I survive this trade, I will put my stop loss on the next major dip to lock in the profit.
QQQBall: I thought about placing my stop loss near the top of the gap, but then I realized the filling of gaps may not mean anything. I analyzed the 3-month QQQ chart, and I saw six gaps. Three of them obeyed the gap assumption and 3 of them violated it. The red and yellow rectangles shown are gaps. The ones in yellow obeyed the assumption, but the ones in red didnât. So if stop loss were placed near the top/bottom of the gap, the chance of getting shaken out would be high. So I am leaving it where it is and take the 50/50 chance.
Hii a_ooiioo_a: Paper trading is all I got right now. It is a mean for me to try to prove that I am not a bad trader, even though I got terminated from a prop firm. So every single penny counts. Trying more than one portfolio sounds like a good idea. I will come up with some strategies and see how it will goes. I am thinking the same way too. Corporations are beating estimates and the economy is showing sign of stability. The Nasdaq is trending upward, breaking the previous 3 downward trend lines. I may be too optimistic, but I think we may have seen the bottom and recovery is on the way.
Dbphoenix: Yes, I got it. Since only at my current stop loss would indicate to me if I was wrong or not, I would leave it at that. I donât want to regret getting shaken out since I have been shaken out hundreds of times a day when I was at the prop firm. It already cost me my job. One important thing Iâve learned from reading posts in here is to place stop loss at support/resistance. It really makes sense, since only then I will know if I was right or wrong. Thanks for the strategy. Iâll have to do some homework on that to see how I could incorporate it into my trades. Virtual Trader
Have you ever considered trading individual stock setups instead of the QQQs? I think the QQQs and market stocks in general are more difficult to trade, especially in conditions like these where the charts and technicals are pretty muddled. I find that having a short watchlist and a long watchlist removes you from forcing to "guess" which way the market is heading. By only trading one vehicle, you're also forcing yourself to be trading or in a trade, when perhaps it's not optimal for you to be doing anything but twiddling your thumbs. Just a thought.
Thursday, November 21, 2002 Today was a nice surprise. Nasdaq broke the major resistance at 1425 and managed to stay above 1460 at the close! The market is sure strong and I am glad I didnât get shaken out earlier. My unrealized profit climbed to around $900. It doubled what I had before the big shake out. Although I am deep in the money again, I know it is not real. I feel like being in one of those game shows where the host would give you a choice between the cash prize and the mystery prize. The game show host keeps doubling up the cash prize, trying to get you to choose cash instead of the mystery prize. Sometimes the cash prize is better, but sometime the mystery prize is worth risking for. Right now I can see the cash prize doubling up, but unlike the game show, I have a general idea what the mystery prize is. I guess now it is a matter of riding the wave without getting shaken out. I have to be very careful in picking my stops. Momotrader: I have considered trading individual stocks setup. Unfortunately, I donât have much resource for picking stocks for trading. About year ago, I used have a software called BigEasy Investor which helped me select the stocks with specific patterns, but the trail period is over and I donât have anything else. I know there are software such as Esignal, Qcharts, MetaStock Pro, etc. that are used for selecting stocks, but they are too expensive for my paper account. Virtual Trader
The holiday season is the most dependable trend in the yearly cycle. You just really don't want to be shorting the market from now until Christmas.