Monday, June 18, 2007

Experiment, Part 3

(Again, please forgive the sloppy post. I will clean it when I have more time.)

So, what am I going to do? I have to change. And I know of no better way of doing that right now that taking my "experiment" from today and applying it to real life tomorrow.

So, I am going to go into trades with the idea of buying or shorting them for THE DAY. If by 4pm I am still in a position I will re-evaluate and see whether or not I should hold it another day.

I will have to increase my loss limits a bit. I can't expect to buy a stock and have it trade in my favor right away anymore. Normally, I don't like to lose more than $100 on a bad trade. This assumes a position size of 400-500 shares. That's my average. So I was looking to keep my risk to .25. That just rarely happens anymore.

Not one of my trades today that would have made me money had I bought (or sold) and held to the end of the day went more than 50 cents against me (except TNH, but he's a freak). The losers all moved more than a half point from my entry.

Also, that first half hour accounted for some of the wildest swings in the stocks. In the past, I loved wild swings... not anymore. Straight up and down with no easy way to get out of positions is not a recipe for making money. So, for the first 15 minutes of the day I will not enter positions and I will be very careful to enter any position before 10:00am.

I will buy or sell stocks and give them 50 cents from my entry. If I am correct in my entry, and in a good position I shouldn't have to endure much more pain than that.

I know many people use percentages and stuff to identify loss levels. I may get there, but for now I'm sticking to what I'm used to, and that's identifying loss levels based on real dollar amounts. But I'm open to suggestions.

After the first hour or two of trading, when I have entered a bunch of positions I'm just going to set my stops and leave. I need to break the habit of trading in and out. I think I can only really do it in this way, cold turkey, by walking away. My wife, who used to be a trader, is going to watch them (just in case anything crazy happens) and call me if necessary.

We'll see what happens. It's an experiment. I'll try this tomorrow and modify it as I go along.

It's just like starting over!


Bluedog said...

You may or may not find this helpful, but I rarely place a trade premarket or in the first 30 minutes of trading. It's too erratic and you can get burned on the whipsaw action which you described. Your chart exemplifies this. You can make big money by buying at market open (prime example is TNH) but you also expose yourself to much risk and unpredictability. It would be interesting to see if your results would change if you started trading at 10 a.m. Just an idea. I enjoy reading your blog and look forward to seeing the results of your experiment. Best of luck and happy trading!


Dinosaur Trader said...


Thanks a lot. I am actively leaning towards becoming a market observer for at least the first 15 minutes.

Today is the first day, we'll see how it goes.

Thanks for the kind words,