Thursday, June 21, 2001 = *Special Edition* The State of Trading Posted Wednesday, June 20, 2001, at: 11:16 AM by waxie
THE STATE OF TRADING
This can be used as a primer for trading this current market
I believe. The number 1 question we get asked about is how to use
STOPS and where to take profits.
In the old days of not long ago (1999) being a trader was easy,
frankly. At least it was for anyone who was good at it.
Why?
Because the market only went up, and when it didn't go up it
was buyable on any dips.
We played the same exact rules of the game that work for us today.
We faded almost every gap open to perfection, just like TINY did
today (gains of $20+ on his five stocks! WOWSA!), but
instead of saying WOWSA to $20+ on 5 stocks, the difference
is that we'd get $20+ on ONE of those stocks!!! Or, even better,
we 'd get $20 a piece on ALL those 5 stocks, thus making $100
trading 5 stocks in 1/2 an hour!
Why?
Well, the main reason we can no longer get those kinds of moves
is because most of those momentum stocks are cut in 1/4, or worse.
In 1999 there were 100s of stocks over $100 in the tech bubble.
TOday? I don't recall ANY techs over $100!!! Biotechs?
Yes, still a handful, but not techs.
JNPR was $250ish a year ago, today its $29. AMCC was $100s, now
$13s!
There is simply no way to make those kinds of gains - NOW!
One day we'll get back to those days, but for now what this means
is that volatility is LESS than it used to be.
So, how does that affect our trading attitudes?
Well, first off, in 1999 and 2000 our stops were much more liberal.
I can remember stopping out of stuff minus 8% which meant $15 losses
(very rarely for us!)
Today? We sometimes stop out for losses of $1 or less!
We have to manage our positions much closer, watching to make
sure we are not letting a stock we are playing lose support.
We also take profits much more liberally. In 1999 I'd very very rarely take a profit of less than $5 - $10 a share!
A WAXIE scalp, as I became known for in our room and around
the trading world meant often times $15 - $20 - INTRADAY!
We rode splits for $150!!! (CMGI,DCLK, VRSN, QCOM,etc all moved crazy
into splits). I recall playing QCOM at about $240 and it closing
near $400 into a 4 for 1 split a couple weeks later.
Today? We get these plays, same as always,but they do not move like
that!
I'd say a WAXIE scalp today is $2 - $5, sometimes less.
Normal "Day Traders" scalp is 1/4 - 1/2, so we are still outperforming
them 400 - 1000% easy, but its all relative to the market.
We take what we can get and move on. To be a sucussful trader
YOU have to forget the past and learn THIS MARKET, what we have here
TODAY!
1999,2000 are gone. January 2001 is gone.
BUT, there aren't any $215 stocks anymore, so trying to get
a Grinch List that would perform at that level and reap those
profits is IMPOSSIBLE!
I've said it 100 times. You can not be a sucessful trader if you
are unwilling to short stocks in this market, period, end of story!
Those of you willing to LEARN, not just follow along, will I believe
reap massive returns in 2001 and beyond.
Those of you simply following along can frankly do almost as well,
but you may be left behind as the market changes.
Being unattentive to your long positions in 1999 was OK because
eventually every stock came back and made new highs.
Being the same way here can make you broke, and cost you EVERYTHING!
Traders today must take profits more often, and take less of a profit.
They also must take more losses, but much smaller.
I believe you can make the same as you could have made, or did make
in 1999 and 2000.
How?
By doing exactly what I posted above -
Traders today must take profits more often, and take less of a profit.
They also must take more losses, but much smaller.
Thats the ticket. We still get our plays like MRVC ($5 on a $9 stock
in 3 days!) a few times, but we also get trend plays that don't
work all the time more often. The object then must be to be steadfast
in managing our positons and monitoring our greed factors.
This is a marathon, not a sprint and in the end the sucessful traders
amongst us know this and use this to their advantage. The traders
who take large losses and buy and hold will fall by the wayside
and never be seen again. They will blame me, or Tiny or less often
themselves (always your responsibility, always) and they will
move on to other professions.
Thats fine and I wish them well. Trendfund.com was set up to
teach the masses how to trade sucessfully.
Doing so means to trade whatever the market gives you. Right now
the market is stingey. Its also unforgiving and malicious.
Complacency in life and in trading will cost you dearly.
Rigorous attention and having a strong plan means you will be
sucessful I believe. I've proved that out.
In 2001 how will YOU do? Will you adapt?
If you do, you will rock. If you do not, you will quit.
Someone recently asked me if the market will ever NOT be tradeable.
I said NO.
Why? Because if you adapt then you will find things that make
you money. Unless the market opens and closes and trades
at the same price every day,it will be tradeable.
BUT, it may be tradeable in an even tighter range and though the
rules may not change (or may), the market itself WILL 100% change
and you'll have to adjust to make the Ka-chingos.
Change in life and the market is good. In fact, its what makes
us profitable, cause we are usually the first ones to figure out
the new Trends.
Stay in the moment, stay within yourselves and take what the market
gives you whether that be 1/2 pt or 50 pts.
See ya on the other side,
WAXIE |
