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

To: Cormac who wrote (5219)	11/6/1999 11:09:00 AM
From: dpl	Respond to of 18137

"How is one to know how good a trade shall be and in what time frame, if I knew that I would be wealthy enough to quit trading and play golf all day. :) " In reality,no.The probability on trades working fits the old bell curve.The better the trade ..the fewer the trade. I have known a lot of traders in my time and would say most assign a probability to their trades even if they don't realize it.Unless a trader trades a strict system like "buy when 3 period ma crosses 10 period ma" he probably "puts" weight into one trade or the other.You always hear traders say things like "I waited for the perfect trade" or "I did the trade even though it was not great" Assigning a probability to a trade does not have to be "real" in the sense that you actually know the percentage.It just means that you keep your trades proportional. An example of this is two trades I did in the same stock.Two weeks ago SUNW broke through it's high of about 100 with huge volume and a big gap one morning.It had a very strong resistance point at 105 1/2-106.A very strong move meeting a very strong resistance point.What's the probability it would stop there? Who knows. Let's just call it 60% since it could be close to 50-50. Since it was not very good I shorted a very small amount at 105 1/2 and 105 7/8.The stock went to 106 1/2.It broke through.I covered at 105 3/4 on the pullback.Even if I had lost a bigger spread it would be a small loss. Two days later the SUNW runs to new highs toward a very strong resistance point of 109 1/2-110.What are the chances now? Once again who knows for sure but they were a lot better than the first short. Why? Lots of reasons but the simple ones are always the best.At 105 1/2 the stock was only 5 1/2 point from it's break point.At 110 it was 10 points.More over extended.The up move was a little weaker since it was not a gap. I shorted three times more at 109 7/8 than I had at 105 1/2-106. The important thing is to keep it proportional. I could have lost three times the "points" on the first trade as the second and not lost money for the two trades. David