Hi Skeeter Bug; Well, I have to admit, I bought AMZN
today. A daytrader reports:
I bought and sold three times, 200 shares each.
Lost 11/32, made 1/4, and made 1/2, overall made
13/32. I'm kind of embarassed about losing money
on the first trade, cause I was up around 1/4 at one
time in it. Too much greed. Purchases were at
13:57:05, 14:50:40, and 14:59:51, EST.
I owned the stock for 5:13, 0:40 and 2:12, or a total of
8 minutes, 5 seconds. This means I only had my
money at risk for about 2% of the day, which reduced
my risk considerably. In addition, I've got level-2
Nasdaq quotes, so I can tell how much depth there
is to the market below the highest bid. Thus when I
go into a trade, I know about what my loss will be if
the stock starts to turn against me. And if that stock
starts to go against me, I dump it hard and fast. If
you have to stay in the game to earn a living, you
have to use stop losses.
Incidentally, professional traders have a practice of
limiting the amount of money they have at risk on any
one trade. This prevents them from losing their capital
through a series of unlucky or stupid plays. The usual
limitation is 2% of capital per trade. A trader with a
$100,000 account should only put about $2000 at risk
on any one trade, or any one collection of very similar
trades. Since AMZN can move about 10 points in a
day, this means no more than 200 shares of AMZN
in that $100,000 account. I believe that owning more
is what the pros call "overtrading" and effectively turns
investing into gambling. I only trade 200 shares of AMZN,
cause it is illiquid as all hell. With 200 shares I can almost
always get out at the next price level. With 500 shares,
you might end up having to use two price levels.
Recently the stock has predictably ran up another 50
cents or more whenever it sets a new all time high. This
is what I've been trading on, I buy when I see it make a
new high, then offer it out into momentum. I won't usually
make the whole move, cause of slippage and other delays.
As far as a long term play, AMZN is still running on very
high volume. So don't short it yet. Wait until it has a day
when the volume is roughly half what it is right now. To
go into the trade earlier is know as "picking a top", and
it is not a good idea.
So all you bears, limit your share size to small enough
amount that it doesn't leave you bummed out. (Try trading
with a 2% limit. You will find it very relaxing, unemotional,
and rewarding.) Also don't try to pick tops arbitrarily, instead
learn some technical analysis to get you into these trades at
reasonable times. If you are dead set on shorting AMZN,
I suggest looking over the chart for the last year carefully.
You might look at how long upswings and downswings in
the stock last, and how much it moves during those swings.
Short the stock when it is in an identifiable down swing, but
not so far into it that it is close to turning on you. I suggest
watching the volume, and waiting until the (mindless)
daytraders get tired of it and quit selling it to each other...
-- Carl |
