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One strategy I've been using lately is to use TeleScan's ProSearch feature to get a list of 25 or so large cap stocks that have high current earnings growth, high relative strength, etc....look at the charts......then, assuming the general market is in at least a short-term uptrend, pick two stocks in different sectors (or at least different groups in one sector, make sure the sector and group are high on AIQ's group/sector reports, then buy at least 500 shares of each stock, and either let the trades ride (hopefully upward) using 7% trailing stops, or play them in-and-out daily, depending on my mood.
If I want to get aggressive and have the time, which I usually do, I study these stocks' trading patterns (from the charts) and play them almost daily, selling the each morning at the high (usually during the first 30 minutes of trading), then buying them back at the intra-day low (usually during or right after lunch), then playing them all over again the follow day(s).
This way, I can often get 2% or more in a day on the stocks, or let them ride and get 5% in a week or two. Two percent over and over each day appeals to me, but requires a lot of studying and very careful timing each day. It's almost impossible to get the exact tops and bottoms, of course, but playing the same stocks let's me get familiar with how they trade so I can devote more time and energy to watching and timing the market, which often accounts for most of the movement in the stocks I trade. I find that if I get greedy and try playing the same stock more than once in a given day, I usually screw up the second time and give back the profit I made in the first trade. I usually only see one really great trading opportunity on a stock in a day, trying to get more becomes a bit risky, imho, takes too much effort.
I try to avoid high flyers (which drop quickly also), avoid internet stocks that may have modest or doubtful intrinsic value - moving on pure speculation, avoid Small Caps which seem to be out of favor, pick stocks with reasonable spreads (1/4 point or less), stocks over $20/share, usually prefer stocks over $70/share with some volatility. Picking the right group and sector, and making sure general market is in a uptrend help guarantee that stock will go up while I'm trading it. I like the stocks to be very liquid, trading at least 1 million shares each day. To limit risk further, I avoid trading a stock as it approaches earnings announcements or stocks where I can find any negative news. Picking the stock from a TeleScan ProSearch helps insure the company is fundamentally good. At that point, with a cooperative market uptrend, I'm basically playing the intra-day swings, timing the plays as best I can by studying the one or two stocks. If there's enough volatility and a definite uptrend, good, steady profits can be made. And it seems to not require as much work, or subject me to as much risk, as trying to play for shorter terms (like 5 minute SOES trading), not requiring sophisticated trading/execution systems with the requirements, limitations, and risks they impose. I find this method, which only works in certain markets, to be more relaxed and easy going. That's why I think it might appeal to beginners who are learning the market, learning to trade, learning software, etc...all at the same time.
Some stocks I have traded recently in this style are GE, CSCO, SGP, PZE, WMT, GPS, DELL, SUNW. Also, I only pick stocks I have heard of, know rather well, feel comfortable about. If the market takes another 300 drop in one day and I miss my 7% stop, I would feel comfortable keeping the stock long term (weeks or months) and waiting for it to recover, rather than bailing out quick and taking a 10% loss or whatever might be. I am assuming I have a short term problem that was only due to the temporary market hysteria and overreaction, not a real problem with my individual stock.
This trading style has worked quite well for me recently and has resulted in consistent and substantial profits. Most important is to time the market, which can be done quite easily with software such as AIQ, and to pick the sectors and industry groups that are currently in favor. Beginners can do this, or the information is readily available in the media and on the internet. The risk is minimal, profits good, and timing is not so critical. If one wants to take a day or two off and keep the positions, these stocks can "act" like long term investments until one wants to trade them actively again.
Finally, market was doing nice until past two weeks, seems to have taken a modest correction. But I think it's already bottomed and started a new uptrend which will probably not last too long, but will result in a new trading range a bit higher than our previous trading range, offering a short-term trading opportunity. I was all-cash lately during the correction, but will probably open a few long positions Monday afternoon (if market acts "normal" during the day Monday) and ride them as long as it holds. If there is more correction due, I don't expect it's much, as we have already seen the most of it. All the real economic indicators are positive.
Anyone else doing or done something like this? |
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