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Strategies & Market Trends : Momentum Daytrading - Tricks of the Trade -- Ignore unavailable to you. Want to Upgrade?

To: Jason Dekker who wrote (520)	2/16/1998 10:35:00 AM
From: Ken Wolff	Read Replies (2) \| Respond to of 2120

Jason, Yes, open shorts are much harder to determine the entry point. There are several methods. A while back I posted my technique on determining tops and bottoms using my PAUSE INBETWEENER SELLING method. You must be quick to catch them as the MM's are quick to downtick when they see the momentum turn. Once in, I give it a little more room than I would on a normal buy but 1/4 is usually about it. If I miss it, I cover and re-short at the next level. One of my students who has been with me for over a year will only short when the percentages are high that the stock will drop (determined by tracking) right away. When this starts happening, he shorts right after the bell and waits.... if it doesn't drop right away, he bails.....every time.. his percentages of success have been huge on open shorts. He misses big drops all the time but NEVER gets caught in bad open short trades, losing only 1/8 less. He has a rather unique approach, he makes very few trades, he lays and waits for only the very high percentage trades, tracks them until that particular pattern is repeating and then enters the trade. He does not trade just for the sake of staying busy or just to trade as some do.... he moves from pattern to pattern as they start to repeat, he sits out holiday trading, afternoon trading and almost the entire Dec-Jan period..... textbook momentum trading :) Discipline is the key........ If the percentages have been very high that a stock will fall right off the bat, sometimes we short at the bell. If we are wrong, we cover and re-short. Lately we have been making a killing on open shorts. They come and go in waves. This is why an accurate tracking method is important, to determine what is working and what is not. Lately they have been hanging for a while and calling the tops has been easier.... Trading with a friend or a group who play the same type of patterns is helpful to help track these trends. If you trade with others, have everyone work off the same tracking sheets. In my book I worked up tracking sheets for all the different patterns I follow, Dumpers, Gainers, News, Publication and most important of all Tops and Bottoms practice tracking sheet. I found this to be my bedrock of my success, my ability to call tops and bottoms with a very high percentage of accuracy. Many students in my room have learned to do this also. If you can get this down, your percentages will jump ten fold. For those who have not read my earlier post on tops and bottoms, I suggest you go back and read it, create a tracking sheet with the following headers on it.... symbol, type of trade (dumper/gainer), selling, pause, in-betweener, buying, your bottom call, actual bottom call and comments. Write down the symbol and the type of trade, then as selling, pause and inbetweeners happen, check it off and call bottom, then compare it to actual bottom, or top. This is a learned talent and CAN be done with great accuracy over time....... do it and increase profits :) Practice this technique over and over again until you get it down.... you will not be disappointed if you do. Every time you see a stock dumping or gaining, try to call the top and bottom. Stay away from fast moving stocks and very slow moving stocks as these are very hard to read, and with fast movers, it could turn on you in a heartbeat and be down a buck before you can bail..... Slow movers are much harder to read and level II is a good tool that some use...... Back to the open shorts... If you have noticed that the open shorts have been hanging or climbing at the open, then give it a little more room before you enter, but if they are dropping like rock at the open, take the leap, short and cover if wrong. NEVER ride a stock either way, expecting it to drop or climb....never, never, never..... If you do ride them out, you will catch one or two really big ones, but in the long run you will lose and be sitting on those pesky "dogs" you have been waiting to break even on for long periods..... I am not a big Wade Cook fan but one method he has touted is the "meter drop" method.... making little gains here and there vice several large kills. This I hold true in daytrading every time.....at least with my method of daytrading..... Good Luck Ken mtrader.com