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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: ynot who wrote (2377)	8/4/1999 10:06:00 PM
From: TheKelster	Read Replies (3) \| Respond to of 18137

This was my response to a PM about day trading verses longer positions. I have not included any of the PM. My Response: Have you read Reminiscences of a Stock Operator?? If not get it, read it, then go back to trading. Swing trades will always be more profitable than day trades. I am slowly becoming more of a speculator than a "trader". Meaning this: I am coming to the realization that speculation is where the big, big money is made. One can make a living day trading. With enough capital a fine living. But the real mother lode is in understanding the big swings of the market and playing them to the hilt. I am going to share with you an example that bugs me deeply to even think about. If you look at a chart of CNXT you will see it went IPO this past January. I began to move in and out around the 16 to 17 range. I wrote a bit about this stock earlier in the thread (you can review for more details). Over the course of the next 5 months I moved in and out of the stock. I used on average about 30K to 40K on this position and just managed to double my money. The thing that saddens me is that I could have taken the 40K just bought the stock, left it alone, and in 4-5 months turned it into 160K. Instead I worked in and out of it "day trading and swing trading" and only managed to capture 1/4 of the increase in value. This is not an isolated incident. I have observed this pattern develop many, many times. I have read Reminiscences, and the original Market Wizards by Jack D. Schwager (first published in 1990), 5-6 times each. I am beginning to see deep into the core of the speculating practices of all these winning traders. What I see in the books is starting to match what I see in the Market. These guys watched and waited and watched and waited. When the time was right, so right, they all went deep. They waited sometimes months before entering a position. Then they held, many times, months before they sold. This is not something that initially reaches out and grabs you when you read these books. When you first read them you just get pumped up by the excitement and you tend to think they were just trading, trading, trading all the time. I think we see what we want to see. Now the key thing here to be aware of: This is not just a buy and hold strategy. It is critical that you note first off the big trend had to show signs of going in the direction they were playing. Next, and very very critical, it is important that you make a small test and see some profits before you go deep. If the trade concept you are hoping for does not begin to, shortly, pan out then GET OUT. Do not try to hold and wait out a losing position. Take the loss. If the situation turns around and begins to show you signs that you were in fact right, get back in. The other hard part. Once you are in and your position has shown you some profit. Stand pat. If it shows a little more, buy some more. Read "How I Made $2,000,000 in the Stock Market" by Nicolas Darvas. It gives you a very clear method for telling you how long you should stay in the stock. It gives you a way to tell when the "long term" trend is ending. This past summer I have been doing some intense study and review of my trading. I have gone back and reviewed a number of trade situations and what would have happened had I used a more speculative approach. My analysis of the situation is that I would have made more than 10 times the money I did make, if I had employed a more speculative approach. Keep in mind flexibility is paramount. I do not have a thing for one type of trading over another. I am just out to make the most money in best time frame possible and I aint gonna stop until I have extracted millions from the market. The market has seasons and mood swings. One cannot just take a fixed idea and rigidly apply it in all seasons. But by using a long horizon (2 months to a year)assessment I think there are many fine situations that will yield far greater returns than the day trading approach. One particular refinement I employed in the past when I was just investing, and am now bringing back into play, is the return performance comparison chart. What I intend to do is pick out 4 to 10 stocks that I believe will at least double in the last 3-4 months of this year after the market gets done with this "correction/crash". (I have a "feeling" this may be a substantial pull back, worse than 98). Then I will keep them on the board. The ones that show the best signs of coming back will be the ones I zero in on. One way I will keep track of this is by using a return performance comparison chart. That way I maximize my capital. You don't want a situation where you buy a stock and it is in fact going up but more slowly than another competing stock. If the slow stock was consistently going up you might never get a sale signal, but, you might not make a very good return either. So compare the climb rate and if necessary sell the slower moving and buy more of the faster performers. In the meantime, in this market I am only day trading. Sometimes even coming close to scalping. I do not trust any rallies at all. I am not holding anything overnight. This is the kind of market that will see a stock go up beautifully maybe even 4-6 points, for 2 days. Then just when you have fully loaded up, it opens in the morning down 3 and continues to plunge all day long. Nasty. KK