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

To: SnowShredder who wrote (7584)	3/28/2000 12:04:00 PM
From: Robert Graham	Read Replies (1) \| Respond to of 18137

Thank you for your good words! I have been working on not giving back too much also. I find that I have no problem with the larger setup patterns and if price responds in an "obvious" way at a juncture. Also I am usually good at microtrading in determining near where price reverses. The problem here where price can reverse is not an adequate profit for the trade I took, and price may pullback to continue further. I find many if not most of my trades that end up as losers had at one point in time about a 1.5 point profit. So my timing tends to be good. Here is my solution: trade two contracts. On these shorter "scalping" trades where expected profit is to be at least two to three points, as soon as price looks to be ready to turn around, take off one contract to cover "costs". And if at all possible, move up the stop loss on the other to B/E if possible, or at least to a point right before B/E. This will allow me to get at at the worst case a very small loss. More than likely, as long as price moves a bit further to meet my minimum requirement of a two point or more scalp, I can make a net profit. There are a couple advantages to this approach. I can cut losses in this way by taking advantage of the initial movement a setup usually provides me. This will allow me to get to profitability for the trade much sooner. Also there are psychological benefits. When I am anticipating price to continue, I can afford to give it some room on the second contract without feeling I am in a rush to take profits. This will particularly work out for the larger setups I can trade. Possible disadvantages are commission which may be significant for some. But it is not for me at just $12.50 a round trip per contract. Also execution of my order would have to be fast which it is usually at 10 seconds or less. Since I have two contracts on the table this means increased total risk for the trade. I will have to work on what I will do if price is just marginally moves in my direction and looks to be ready to run against me. Taking into account how slowly the market is trading and the size of the setup I am trading, it may be best to get out. Also there is the inadvertent bad trade that has price thrust against me. But this happens very little. Also trading larger setups in this way can help provide me both "elbow room" in time to manage multiple contracts in this way, also more likely providing me with a second point I can move my stop loss to before B/E. And this would provide a better risk to reward for the first contract used to cover the cost of both contracts. I would not want to trade a small setup in this way unless part of an established intraday trend. Then is this case, I would trade both contracts together. The trick to this is my timing has to be good since two contracts are on the line and I need at least price to thrust in one direction even on a trade that did not work out in order for this approach to work for me. Also it may be worthwhile looking for the trades that will give me a second point to move my stop up to before B/E, or one that initially allows me to limit my risk. I would have to work on the timing aspect. For even though me exit is usually good, my entries particularly in a slow market can be too early. What is nice about this approach is when I am trading the setups on the 5-min time frame that has a price target of three or more points from my entry, when the market is trading well in that time frame, price does not stop until at least two or more points are in which is good enough for a scalping trade, a good point to not only cover costs but lock in some profit. Then I would move my stop loss on the second contract to B/E. Sounds interesting? Any thoughts? Bob Graham

To: SnowShredder who wrote (7584)	3/28/2000 12:37:00 PM
From: Robert Graham	Respond to of 18137

Oh yes, I do agree with that important aspect you had mentioned in your post "When not to trade". I believe it relates to one of the most frequent mistakes novice traders make which is overtrading. Also I have never seen it covered in a book, and I suspect this topic is not covered in any course work. After all, you are there to learn how to TRADE, not to learn when NOT to trade. But this one aspect of trading can save the novice allot of money in their learning curve. It relates to the trader being aware of how the market is trading and how this can impact their success in taking the setups they trade. Bob Graham