I'm looking for a few opinions on this. I'm new to trading (just into month 5). I had my first positive month in February (barely). I have upped my shares this month, and I'm having mixed results. I usually have a good morning, until about 10:30-11:00, then often give it all back with high interest by the end of the day. My daily goal for this month is $200. I have been averaging above that on my up days, but I keep having a blowout (to me--$800 or so with commissions) down day about once a week, ruining my week. The really tough thing to swallow is on these days (3 so far this month) I was up between $200 and $400 at some point early in the morning. For example, this morning: up $430-$80 commissions at 10:15, down -$415 -$279 ($694!) at 4:00. I lost most of it around noon when the market dropped on the hand grenade news. I didn't see the news, or the initial drop. I have been trying to avoid dead zone trading. When I walked in at 12:20, the Naz futures had dropped a fairly smooth 14 points and had already retraced almost 50%. There was some volume, so I jumped into some mistimed shorts. I was quickly down, panicked, flipped my position, lost again, then took one more short out for flat before I could even realize I was trading panicked and stepped back. I took a break, came back at 2:45 and churned a whole bunch in commissions for nothing. My plan for next week is as follows: If I'm up over $200 at 11:00, quit for the day. Otherwise, I can play the close. It just kills me to know I may be missing opportunities and experience. I know I'm eventually going to need to play the last two hours to move to the next level. Hmmm...this post ended up kind of long. Any thoughts on this plan, or advice otherwise? Thanks, Johnny EDIT: I posted this in the wrong forum and now I don't seem to have permission to delete it or move it. Oops.
JPB, If you are profitable in the mornings and giving it all back in the afternoons, I would suggest only trading in the mornings. If you are worried about losing trading experience, why don't you paper trade in the afternoons until you can prove to yourself that you can consistently make money trading in the afternoon. I know this is a cliche' but you must cut your losses short and strictly follow your trading plan. I am assuming that your blowout days are a result of letting your losses get away from you. A successful trading strategy will not consistently have a single day that takes back a weeks worth of profits. If you are strictly following your trading plan you may want to consider making changes to limit your losses.
I suggest you just trade mornings for a while. If you find this pattern to continue to be profitable, ramp up your size so you can ramp up your profits and then call it quites for the day at noon. Do you know how many people out there would love to have to work only 2-3 hours a day! Don't fight your nature... stick with what works best FOR YOU, no matter what works well for anyone else.
Woody-- My losses are usually reasonable on a per trade basis, I seldom lose more than .20 or .25 on any trade unless I miss getting filled and chase it with the rest of the sheep. But when I get down for the day I really start to overtrade. When I am up, I have great patience. When I am down, I don't. I am still trying to overcome the need to "get it back." Thanks for your insight. Johnny
Set a limit that you will allow yourself to lose in any given day. If you hit the limit, shut off your computer and leave your workplace. Don't think twice about it. Also, you may want to do the same after a certain amount of bad trades (not necessarily losing trades, but trades where you have violated your rules). This should stop those occasional blowout days.
Okay, I'm convinced. I pretty much knew this was what I was going to do, I just needed a second opinion. For the rest of the month I quit trading at 11:00 if I am up more than $200. No deadzone trading no matter what. I'd like to put in a maximum daily loss as well, or the max number of bad trades (good idea). Maybe $200 down? I'll think about that one. Thanks again. I'll let you all know how it goes. -Johnny
If a trader is profitable in the morning and tends (consistently) gives back those profits in the afternoon attempting to trade the dead zones...it's only logically to only trade the morning. I know several very successful traders that are done by noon. I myself try to be done by 1pm est. Most of the time I can do this. Out of curiosity...how did you not see the news? I know financial networks like CNBC are noise to many...but they usually provide quick info for situations like the handgrenade news to allow you to quickly exit a position that's on the wrong side of the street. The NQ Futures was looking a little weak between 1130am est and the grenade news release. Important question...are you bouncing from stock to stock (not allowing yourself to understand how a particular stock behaves) or do you trade a few stocks or one stock only? The latter is recommended for those that for some reason "FEEL THE NEED" to trade the infamous DEAD ZONE. Another question...are you a scalper? Also...you said..."I know I'm eventually going to need to play the last two hours to move to the next level." Yes it's true that some of the best trends (up or down) occur in the first 2hrs and last 2 hrs of trading.... Yet, the morning sessions the trade setups are clearer whereas the last 2 hrs of trading...a lot more wiggles and require a lot more patience and experience. Also...I feel that the market behaves differently throughout the intraday cycles. Thus, managing your position size accordingly to the intraday cycles you make or lose your money will be an enormous help to your profits. Simply, if you enjoy the risky DEAD ZONE...try reducing your position size. Nihaba Ashi
One thing that has helped me a lot is to keep a record of all of my trades. Usually, you can go back and review your bad trades and it will be obvious where your mistakes are. Your goal should be to learn from your mistakes and use strong discipline to stick to your trading plan so you will not make those mistakes again. I keep a written list of things that I have learned from reviewing my bad trades. I review my list from time to time to remind myself not to make the same mistakes and only take trades that are well set up. Losses are inevitable, but are not nearly as painful if you are strictly following your plan.
The best time for trading is 10 - 11:45 and the last 30 minutes. Do I follow this rule , not exactly. A lot of day traders say dont trade the open , I have mixed feelings on this. As for that dead zone from noon to 2:30 , I have lost most of my money during that time trying to determine the trend . So I don't do it anymore. O I was shorting during that period , something else I wont do anymore :-]