[thalestrader]

Originally Posted by brownsfan019 »

I have to admit - after you've started posting here, I've been watching stocks closer via freestockcharts and there's days where I sit there & think - this is so much easier than trading futures. I've just seen quite a few days where doing what I do now on the big % gainers/losers works like a charm (and what appears to be easier).


Separate question - do you ever use options on your plays? Just curious what your thoughts are in regards to using options to daytrade.

I agree that trading a limited number of futures intruments compared to a universe of 500 stocks will present fewer opportunities to trade in the manner that I prefer to trade. But you can trade futures the same way, but as you suggest, patience would be required to wait for these moves to present themselves.

I also think day trading stocks is easier than futures. Additionally, day trading stocks is less risky and easier to control one's risk. This is why it baffles me that the feds let folks swing a 40k, 60k, even 80k notional value futures contract with a $500 margin, but then the feds insist that it is too dangerous to let someone buy and sell 100 shares of a 20 dollar stock using even 100% cash unless they put up 25k!

I do trade options, but not for daytrading. I trade IBD 100 stocks, and will use options to take positions if a particular stock is optionable. These trades last days, weeks or months. I am usually buying a call option with 3 months.

Best Wishes,

Thales

[brownsfan019]

Yeah, how someone can open an account for $5000 (or lower) and trade futures contractS is beyond me. Yes, plural - multiple contracts. You can get $500 margins and trade TEN ES contracts with 5 grand...



No clue how that is able to happen yet you need $25k to trade stocks.

[thalestrader]

Two trades today - both great trades, but both were losing efforts.

I am not one to post-mortem losing trades. I do flip through 600 charts each night (the 5 minute chart of each issue in the SP500 and the daily chart of each IBD 100 stock). I do review each day's trades. I print each chart, place it in a three ring binder, and flip through these charts from time to time. However, I feel that there is no need, in most cases, to autopsy my losing efforts.

This is because I trade the same way all the time: I'm either buying new highs or shorting new lows; or else I buy or sell the occassional pullback to the 20 ema on a 5 minute chart following a strong move (as I did today with my second losing effort, GILD). Very simple and straightforward, with the result that over time, most of my trades are either small wins or even smaller losses, with the occassional profitable runner thrown into the mix (as LM was yesterday).

Once I am out of trade, I am out, both financially as well as psychologically. It matters not whether I am stopped out with a loss and the stock immediatley reverses to move in what would have been my favor. I do not care that I am stopped out with a profit and then the stock resumes its favorable move without me. If I'm neither long nor short, I do not care what a stock is doing.

However, the COV trade today handed me what I believe to be my largest loss of 2009 - I lost 42 pennies/share on that trade. And for the first time in a long time I was not pleased with the manner in which I managed a trade. So, while I am not one for performing forensic dissections of my trades in general, I am going to do so for this one in particular.

I bought COV as it made a new high for the day. My buy stop was 37.30, and my fill was 37.33. The HOD today was 37.34. It happens, and there is nothing I can do about it, and it doesn't bother me in the least. I often find I shorted the low tick or bought the high tick for the day. It is something that will happen from time to time if you trade in the manner that I do.

However, typically, when I have bought the high tick, or close to it, my loss is, also typically, quite small.

How small?

Usually less than 20 pennies/share, often between 10 pennies and breakeven. This is because when a stock (or any instrument, for that matter) makes a new high that it can't hold for even one 5 minute bar, then that breakout to a new high is usually a false breakout. I know this, and I typically take myself out at the market. As I said before, once I'm out, I'm out. I move on. This time, in spite of the quick retreat from new high ground, I stayed with COV.

It immediately started a decline and pulled back to 36.92, and then it rallied back to 37.20, where it stalled. And that was the best it could do over the next 12 bars. And here is where I really misbehaved. When price stalls at a level after repeated attempts to push through that level, then odds favor that what you are looking at is not a continuation pattern, but a reversal.

I could have cut the loss at 13-14 cents, but I didn't, and I had nearly an hour to do so. Instead, I stuck it out, only to watch the slow death roll of a failed rally take me out at my revised stop of $36.91.

I've said in other posts that for me, every trade begins as a scalp, and if price action doesn't confirm me to be right immediately, I take a small profit or small loss. Today, COV should have been such a trade.

I've attached a chart of the COV trade, as well as the GILD trade. GILD was a simple retracement to the 20 ema, it didn't work, and I was stopped out for with a dime loss. The COV was a failed breakout to a new high of the day that I should have cut off immediately but I didn't.

The longer a consolidation takes, the more likely it is a reversal in the making, and not a continuation, especially if price stalls at a level below the high of the consolidation. I know this. Today, for a few hours, I forgot it (or chose to ignore it).

Lesson (re)learned.

Best Wishes,

Thales

[brownsfan019]

Great post Thales. There's a lot of little gems in there if you read it closely. I don't nominate posts that often, but I really like this one.

It's been great to have you on the forum. You've renewed my interest in stock trading or at least being aware of what some stocks are doing.

[thalestrader]

Buying new highs - Buy Stop on TEL @ 19.78

Filled 19.78

[thalestrader]

Originally Posted by thalestrader »

Buying new highs - Buy Stop on TEL @ 19.78

Filled 19.78

New highs beget new highs

[thalestrader]

Originally Posted by thalestrader »

New highs beget new highs

which beget higher highs

[thalestrader]

Originally Posted by thalestrader »

which beget higher highs

which do not always stick ...

took me out at the market +15 pennies/share