Harry, best of luck with the transition. It looks like your are getting all your eggs in a row for a successful transition. Before I answer your questions, know that many investors-->traders have a very difficult time making the transition and some with an incredible eye as an investor often fail at day trading. This might be as a result of not having an understanding of how a trader succeeds, a lack of discipline at maintaining the game plan, or simply a prolonged bad market place. Don't overlook the fact that you might simply be a top notch investor and not a good trader. Most of the truly big money I have seen gets made through 80% investing, 20% (or maybe slighly more) trading.
With that said, after the day starts, you should move your top 20 to 30 stocks onto your main quote screen where you can put the securitites in columnar format with last, bid/ask, bidsize/asksize, last print volume (last trade volume), total volume. You can always move dead stocks off the list and continue to ":browse" the other screens, moving well acting stocks onto your main screen.
I would not daytrade stocks that print lass than 150-ish thousand shares. YOu can be successful with less active stocks but the odds start to move against you.
As a trader, you try to puruse every angle where the odds are in your favor. This includes stock selection, execution etc.:
As an example, the odds are better with stocks that are acting well.
I have seen "traders" do well being contrarians trying to buy oxhp when it collarpsed from 86 to 39 overnight. Stock is like 25ish now. As a swing trader, that's abig loss. For a day trader who lacked the discipline to kick it out at day's end, its a no-no.
Volatility - this is a much debated issue. I know a lot of traders that love big stocks that swing back and forth, back and forth, 1,2,3 points (although there havent' been too many of those this year). Personally, I like 10 to $30 stocks that move 1/2 to 5/8 a day. These usually are the type with less volume but enough that I can see some good prints, get aboard, turn to it an hour later and sell for the 1/4 or 3/8. Sometimes they do better, hopefully, they do worse less often.
I can't personally stomach a RMBS or even a dell. To me, that's like going to the casino, you could be up 2 or down 2 with no rhyme or reason. I like stocks I can see patterns in more. Stocks like amat, dell, intc, msft that trade multiple, multiple millions each day, I find tough to derive a pattern or see accumulation, there is just too much action to see activity.
Sources for the list of stocks - you have a good source with IBD, I like looking at increase in volume %s, percentaqge ups, downs,etc., it shows interest, good or bad. I like looking at SEC edgar online for inside buying or other good/bad news which is not on the "news" yet. Barrons has a number of good charts and lists. To give it its due credit, SI has some value. but I like more formal sources since these sources but their name and integrity behind what they say. 99% of the posters on SI have some hidden motivation, usually the misguided idea that their post will convince the stock to move higher. Most don't place their name/email/ etc. on their username which should tell you something about SI. Edgar=online stands behind their news.
Most traders sort of like certain stocks which never fall of their list and often get too busy looking at good stocks to pull old stocks that are not acting well, off the list. Many times, a stock which I thought was good but never materialized, often later becomes active and might be an opportunity that I would have missed if I cut it off the list, so if hard drive and application space is not an issue, leave them on as long as possible.
What to look for- look for a stock that when you buy it, it goes higher and when you sell it, it goes lower so you can buy it back later. lol.
Seriously speaking, you want stocks that are "acting well", printing upward with reasonable volume, where prints on the offer move the offer, where prints on the bid don't rock the stocks, etc. Good stocks have a certain look and feel. If a fund is buying xyz, there is not way to get around putting the prints up and acquiring the stock. Tape watching shows this and should lead you acquiring the stock. Some SOES trades focus in too much on mm's moving around, changing position, which is critical, but not complete. YOu need to look at times/sales/quotes and how the stock reacts relative to the orders coming onto the trader's desks at the mms.
On a side note, it is important to improve your skills on all execution systems, sooes, superdot, selectnet, phonebased-act (altough you can't do this, your firm does it foryou), superdot, raes, etc. You need to be sure you are with the right firm that acts in your best interests, always.
Lastly, FROM MY PERSPECTIVE, I think it has been a difficult few months for many traders. With a market sliding sideways, opening at the day's high and simply pulling back, it is difficult tomake money. If a stock opens up 3/8, drops 1/4, goes up 1/8, drops a 1/4 , up 3/8, down 1/4 and closes down 1/4 for the day, there is simply no room to make money. With the recent flight to quality to the DELLS, ge, lucents (which are less traded by your "nonprofessional trader") small and midcap stocks have been left in the cold.
Personally, I did not execute a day trade for myself this entire week. I I am not talking about client orders of which I handle about 50 to 100 per day, but I am talking about stuff here and there I do for myself. Perhaps it is because I have something else to turn and do and I make a salary, that I don't "push" an issue or trade where one should prudently not trade. Nonetheless, I have been less active the past 6 weeks or so. It is probably in line with the fewer posts I have put up here.
who knows? All I am saying is that there is a time and place for everything. From where I sit, I see soes trading dying off, most traders become more all-purpose (soes, snet, raes, superdot, act) traders as result of the dynamic marketplace. I have seen investors begin to realize the limitations and shortcomings (especially for trades) of the online trading firms that make market or act as principal or simply non-disciminatorily route orders. NOthing like a correction to change the whole marketplace.
Personally speaking, in a corrective phase, there are a tremendous number of opportunities that present themselves for long term investors. This is conditioned on your cash position, your long term portfolio risk tolerance, what industries you like, etc. To spend time struggling, trading for 1/8s and 1/4's when you should be finally putting your long term assets to work through research and filtering in the good/undervalued companies, seems wrong. Hopefully, the market recovers and your long term portfolio gets working the right way and then in an up market you can take advantage of trading opportunities.
Nonetheless, on big down days, there are some great opportunities for trading and should be pursued.
But as I said when I started this long-winded post, most of the big money that my clients, people I know, investors we have all read about, come from a combination of investing and trading, with trading comprising a smaller percentage.
Good luck.
Steve@yamner.com |
