a few thoughts from a mostly lurker, until one of you cynics riles me up enough to post <GG>:
short term trades are fun if they are successful, i often run scalps when the market is good, but as dan said, those trades and posting them don't really help anyone else unless you are communicating with them over yahoo messenger or the like, as they are usually stale within a few minutes...they add to the portfolio gains but serve no other purpose (note also that the Z port apparently doesn't take commissions into effect, and running a lot of scalps definitely increases your commission costs as well)
IMHO a strategy where the winning trades gain a smaller % than the losing trades lose is destined to at least underperform, and probably fail, over time....the main goal of any portfolio should be to maximize gains given the allowable risk, and given that the Z port cannot be characterized as anything less than above average risk, it has to be compared to a market average with above average risk, i.e. the nasdaq...in this great year, the Z port isn't even beating the nasdaq, so for about the same risk, it could have bought the nasdaq index (or QQQ's for about the same result), and avoided all these commissions and the work of trading...any good market strategy that you find will almost certainly involve cutting your losers short and letting your winners run
this is further enforced by the running gains and losses in the Z port...in a year where winning stocks abound, the average open position has a loss....again IMHO, you can't run a portfolio like that and excel long term...i know from my own trading that if i look around and even half of my open positions are sitting at a loss, i am doing something wrong...either i am out of sync with the market, or i have let down my guard in terms of controlling losses and riding winners...there are definitely times when holding a stock at a loss makes sense, as sometimes right after you buy a stock it will pull back with no change in the fundamentals, but when your entire portfolio is held at a loss, again that is a sign that the approach is flawed, especially when the market is overall trending so strongly in one direction (a short QQQ/XLK trade held through most of this solidly up year is inexcusable IMHO)
look at the closed trades for last week, and compare them to the remaining open positions....almost all of the closed trades were winners, yet way over half of the remaining trades are in the red....again, reflecting on my own trading history and analysis, when every trade i close is a winner, that's actually a warning sign to me because it means i am not cutting my losing trades...sure there are times when you are just "en fuego" and basically everything is working, but when almost all of your sells are winning trades, and the majority of what is left are losing trades, that's not a result of being hot, it's a result of bad money management
hopefully this post won't be viewed as overly critical, last year i had a very nice gain through the end of may and then gave almost all of it back being stubborn and holding through the cliff dive the market took over the next 4.5 months...though i was buying quality stocks, i was completely out of sync with the market....i had to look at my approach and make changes to improve my performance going forward, both because i am always trying to do better, but also because the damage my portfolio and psyche suffered in that downdraft hurt my performance over the last 2.5 months of last year, because i was unwilling to take much risk, at a time when i should have been buying everything i could at the crazy discount prices that were available in late 2002...i finished the year with a decent gain, but nowhere near what i should have made if i had been more in sync with the market, as i had big % winners in late october and november but they were on puny positions, given my risk aversion, and the stocks which i had bought during the summer hadn't even gotten back to my buy price for the most part, not to mention the ones i had sold for losses out of frustration, when the market continued to grind lower
in the same way, it seems that the Z port could do much better if the approach was modified...perhaps the short term trading should be eliminated completely (i'm not sure restricting it to the suggested idea of 5 entries a week would be effective, because if a person who makes 40 scalps a week has to try to guess which 5 will be successful before they enter, the results will not reflect their trading ability, but rather their ESP)....the original header defines short term trading as 2 weeks to 2 months...i don't think there should be a requirement that a stock be held 2 weeks, as sometimes on a trade i get stopped out the same day, but it seems that if trades are entered with the idea that they will be held for at least a few weeks, with parameters such as stops in place if appropriate for that stock, the trade should be maintained until it is stopped out, or reaches a predetermined goal, or is closed to move the money to a better idea, in the same way that a successful portfolio is usually operated...this would also give members more of a chance to discuss their ideas, as normally if you are entering a stock with an intended holding time of at least a few weeks, you have well thought out reasons for doing so, and this would be of more benefit to the overall population here, in terms of providing ideas that could be added to their portfolio if their own approach and due diligence merited same, rather than reading about scalps which have already been completed
anyway, that is my long winded answer as i watch the 49ers thrash the cardinals <G> if nothing else this post gives me a reason for constructive thought about my own approach, which i am always trying to refine and improve, so if it doesn't help anyone else, at least it helped me <GG>
by the way, the main reason i don't post trades to the Z port is that until recently i didn't know it was open to people other than the founders/original members...also, as anyone can tell by the frequency of my posts, i don't always check in on a daily basis, depending on what all i've got going on, so i'd be more likely to buy things and then just let them run for quite a while if they are working, and it didn't seem like that was what people here were interested in, as most of the posts are concerning short term trades and ideas
go niners :)
carl |
