Ranting on Stock Market Day Trading (March/2009)
With the month of March largely over, I want to describe my trading progression for the month. Near the beginning of the month, I read professional analysts saying it was time to sell as the market bottom has not been reached, with plenty of signs for continued stock market downturn. From an economic standpoint, some of that analysis had substance. From the candlestick technical analysis standpoint, I saw signs of a trend reversal. After all, the trend line is the life-line of my trading foundation.
Not to be deterred, I proceeded with caution, as always, especially with professionals saying “sell”. And I suppose they get hefty bonuses for what has turned out to be a wrong call. Oh, but the financial industry needs to reward risk taking – no risk, no gain; no pain, no gain. I need to find myself a job where I get bonuses for making the highest risk calls, no matter the outcome. To be fair, perhaps they meant in the longer term, the stock markets are heading lower and that March was just incidental. Or as some have said, a bear market rally.
I don’t directly pay for professional analysts recommendations although I do get reports from my brokerage company. And I can’t help but find the various freely available news and articles on the topic. And as time goes on, I continue to heed their recommendations less and less. They are wrong so many times, I am not sure if it is worth my trouble to even read their advice.
Well, I made a net positive gain on day-trading in March. I need rises and drops in the stock market to gain trading profits. I need price movement where I trade on the trends to make trading profits. I was long and short in three stocks to garner a 15% overall gain in my margin account. I tried to adhere to the day trading paradigm but at times I was left holding my positions on an inter-day basis. I should never have put myself in the situation of holding past closing but my reluctance to take the initial loss led to a bigger loss which finally led to holding past closing. Fortunately, because of the volatility (there were plenty of gap-up and gap-down scenarios), I was able to recover at or shortly after the open on the next trading day; from there, I continued my day-trading routine. I had losing trades which is how it should be if I am wrong on the direction of the stock price. The most important matter is to emerge with a net gain after all trades are tallied. My brokerage company appreciates the trading commissions.
Main lessons to be remembered:
1. Watch the short-term trend lines for price direction and movement.
2. Use the short-term trend lines as a basis for day-trading. If the short-term trend line shows upward movement, it makes day-trading a long position a risk-reward justified trade.
3. If you are wrong on the stock price direction, close the position and wait for another opportunity. Accept the loss. In day trading, there are plenty of opportunities to profit on the rise and drop of the stock price.
StockTradersPlace (http://stocktradersplace.com) provides a trend following system based on candlestick technical analysis. http://stocktradersplace.blogspot.com provides a “Stock Trading with StockTradersPlace” companion guide. Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box. StockTradersPlace provides viewable demo stocks for guest users and a 14-day free trial for sign-up to view all supported stocks.
Copyright © Mar 2009 StockTradersPlace.com
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Categories: guide to day trading Tags: March/2009, market, Ranting, STOCK, Trading
Comparing Day Trading with Other Trading Timeframes (March/2009)
From March 10 to March 26 of 2009, the market indices showed a tremendous climb. The S&P 500 was up 22%. The DOW was up 21%. The NASDAQ was up 19%. The S&P/TSX was up 17%. As of the March 27 close, the indices have retreated, likely due to profit taking to lock in gains after the rise in the past couple of weeks. This may be a pause, or it could be the beginning of a trend reversal. We do not yet know.
I day traded 3 stocks on the TSX, employing long and short positions. I traded in 1000 shares of K (Kinross Gold) and TLM (Talisman Energy) and 500 shares of RIM (Research in Motion). The objective is to take price changes of $0.05 to $0.10 per position to yield $50 to $100 gains less $14 commission. My own rules are to take the gain if it is there. The shorter the time period, the better. Shortest duration was under a minute to buy, then sell a long position for an $86 net gain. Longest duration trade was held until the following trading day which is clearly not day trading! My rules are there for me to break and I ultimately have to account for my own actions and the resulting consequences. If I could hire a trader that follows rules without exception and whom I can trust to return gains of 15% per month, I would. Until then, I will have to do. Seriously, if I can only suppress my emotions and follow rules without exception, I would be far better off in trading performance.
From March 11 to March 26, I made 15% net gain in my margin account. For that same period, following candlestick technical analysis, StockTradersPlace showed a 22% gain in K, 13% gain in TLM and 17% gain in RIM. So, my day trading under-performed the short-term candlestick indicators as well as the indices.
I have stated this before and I say it again. If on March 11, I knew that the markets would go up by 20%, I would have entered into 1 trade on March 11 and sold out on March 26. Since we never know ahead of time how far a stock will climb and the precise timeframe, we resort to various trading techniques – day trading, short-term trading, longer-term buy and hold, options trading, technical analysis, etc. In retrospect, I can say that I under-performed with my day trading. However, day trading is a safe way to avoid the volatile inter-day price movement of stocks which is what an active trader has been facing prior to the recent run-up. Even during this run-up, you can see that it wasn’t an up candle every day. There were dips that suggested a reversal at a few points along the way.
For me, I will continue to utilize day trading along with short-term inter-day trading as per candlestick indicated trends. I utilize whatever works, including equity options in the future if and when I figure out how to succeed with that.
StockTradersPlace (http://stocktradersplace.com) provides a trend following system based on candlestick technical analysis. http://stocktradersplace.blogspot.com provides a “Stock Trading with StockTradersPlace” companion guide. Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box. StockTradersPlace provides viewable demo stocks for guest users and a 14-day free trial for sign-up to view all supported stocks.
Copyright © Mar 2009 StockTradersPlace.com
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Categories: guide to day trading Tags: Comparing, March/2009, Timeframes, Trading
