conrad: I can't paper trade, my head won't let me. I have to play with real money or I learn nothing. You learn from making the big profits and taking the big losses in a way that paper will never provide. For those who can do it, it must be a great way to get comfortable, but it's not for me.
Your head is everything (if your a speculator, that is), and even though the PB attempts to take that part of your anatomy out of the equation, my head won't let me do that either. Not completely anyway. However, this option thing has really got me excited about the PB (with a few exceptions all revolving around timing and selection). I think I may be able to control a couple of my "head problems" much better. Those problems are a large part in my inability to play the PB religiously.
The thinking that really gets me in trouble is failing/refusing to set a stop loss (often I do, but only if I bought it "right", QCOM wrong, MLI and PAYX right) and a necessary preference for cheaper stocks over the higher priced issues (limited means in my account, even with margin). Solve those issues and I'll sleep better at night and work better in the day. The solution? Options.
Yes I caught MLI. It is a perfect example of what has me so excited about the PB. First, I missed it on the Monday after it first gave a signal. I refuse to market order on Monday because the risk is too great (turns out it wouldn't have been on MLI, but you never know). Bad entry makes for bad price stop placement, bad stop=bad trade. A good example of this is PAYX, which would have had you filled high, and stopped you out on price and RS under the PB. But the volume on the breakout (both PAYX and MLI) was compelling and on no news and no coverage. That meant something to me, so I waited, got my price on both and they are good PB's.
However, they are relatively high priced stocks. 200 shares is 8-10k. Unless your playing with a lot of dough, you can't get your arms around enough of those to have a nice chance at win/loss percentage. I'm not, so I can't. Need more shares to offset commissions, etc.
Options! MLI drew down in price and volume to the point that it was quiet as a mouse. I bought April 45's at 11 3/8 on Tuesday when the price was 54 (relatively low risk trade because they were so far in the money). Could have done better in price on these a day earlier, and the 50's were cheaper in price. But I wanted more in the money, and it wasn't really ready to move any earlier. 45's gave me a huge cushion in case it took a long time to move or didn't work out. Bid is now approaching 16, the percentages are obvious: 10% on the stock, around 40% on the Calls. Much less dough on the line, no need for stop placement, same profit as holding the stock, no fear of high priced issues.
Still working on the downside problems: thin markets, best pricing of in the money calls, wide spreads, higher commissions, and more. Overall, I like it, conrad. Do you own the shorting manual?
Happy New Year, BTW.
Jeff |
