I went through each of my trades on Friday. While I made money, it was only because of the "Gasparino Lottery" at the end of the day and not because of any legitimate trading skill. Here's what I learned.
- I’m still adding to positions wrong. It’s okay to add to a position when it’s going in my favor. However, adding after a position corrects back close to my entry is a losing strategy even if that position is technically still a winner.
- Don’t trade thin stocks in the hybrid market. The odds are too stacked against you with the spreads and illiquidity being what they are.
- Unless a trade looks perfect, a major news story breaks, or there is excellent volume in the market, DO NOT TRADE between 12 and 2. This is free time. Move away from the monitors and read a book or something… seriously…
- In a choppy market environment, don’t short the first breakdown or breakout. Often the stock will chop back up to your entry. If the level holds the second time, then enter the trade. Of course, in a market with good momentum and volume, this rule would change.
- Short failed breakouts. If a stock attempts to break out of a base and then stalls, heads back into the base and breaks that base, short it. It’s been working well in this environment.
- Know the bigger picture. I wasted $250 on Friday trying to short DV for a break of $44. Each time I tried it, I lost 25 or 30 cents. Meanwhile, a quick glance at a 15 minute graph would have showed that even if he broke $44, he most likely would have found support at $43.40. So I was risking 25 cents for a possible gain of 60 cents… that’s just not enough incentive…
So, more of the same... trading and hopefully evolving. Working hard to keep a positive outlook but it's been a brutal month. I'm working for a strong close this week. We'll see.