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

To: Ken Wolff who wrote (558)	2/20/1998 5:02:00 PM
From: Ron	Respond to of 2120

Ken Thanks much for the advice. Unfortunately, I did not log the time. Will be doing so in the future. good trading!

To: Ken Wolff who wrote (558)	2/21/1998 11:10:00 AM
From: Marlin C. Harmon	Read Replies (1) \| Respond to of 2120

Ken, Regarding the emailings: Thank you for sharing them with we readers and sometimes contributors to the thread. The added details and logic in your suggestions are clearly helpful. I have an additional question- When do you determine that a stock has sufficient volume to conform to your "no low volume stock" rule? Do you include in your daily routine as you pick the candidates for trading a quick check of the average daily volumes or do you simply judge from the volume already traded in the stock for the day and possibly extrapolate to come to your threshold value?

To: Ken Wolff who wrote (558)	2/21/1998 1:26:00 PM
From: Terry V	Read Replies (3) \| Respond to of 2120

Ken,just found my way to this thread after being an SI lurker for 2 years. Finally joined a couple of weeks ago. I want to commend you for the no hype straight forward information that you share with traders on this thread. I will be a regular lurker, and perhaps a sometimes poster. I have been an aggressive trader for the past 25 years, and a short term full time momentum trader for the past 5 years. A major of rule that has made me alot of money since I began daytrading and short term trading follows: Remove the terms "average down", and "I can't trade, I am stuck in a position" from the vocabulary. In the password protected trading room that I link to on irc, traders that I respect are always talking about averaging down, and being unable to trade, because they have too much tied up in a loser. As I don't want to embarrass them, I don't inject my philosophy on this matter. However, if a TRADER is working with limited funds, dollar cost averaging is one of the most foolish things that they can do. To understand this, you must step away from the stock, and understand that each purchase that you make is a NEW position. The only way that it is reasonable to enter that new postion again as a trader, is if you were entering as an entirely new trade because you felt it was going to move. If that were case, you should've already walked from your original position. I constantly hear traders saying that they can't buy a developing trade because they are tied up in xyz. As a trader you must learn that the value of a stock at any given moment is irrelevant to the cost at which you bought it. If you have to take a loss to make a profitible trade...do it. Understand that If I failed to bail on a $5,000 loser, and still sat on the stock while it wasn't moving, at the end of another 2 days, that money would still represent a $5,000 loser. If I would have cashed accepted my loss, and entered a viable momentum position, my portfolio would be again gaining in value, and if real lucky :-), maybe be back to profitability, or at least on a profitable path. Well, sorry for being so wordy on my first post to this fine thread...but I think that understanding this philosophy will be beneficial to traders. Best of luck, Terry

To: Ken Wolff who wrote (558)	2/21/1998 3:05:00 PM
From: Ken Wolff	Respond to of 2120

Excellent points above :) If you dont have a pre-determined stop or exit point, you are doomed for failure. Take the emotion out of the trade or it will drive your decisions. Greed and fear are a traders worst enemies..... For those of you who didn't request my free advisory that I send to the traders in my room, here is the weekend email I sent to my room members. It has a section at the bottom titled "when my stops are blown".... ========================================================== NEWS: CIEN - UBS securities initiates a HOLD rating. Reports .37 versus expected .35 but sees a slowdown...so far it is dumping.. PMRP - Meets estimates but there is a medicare investigation in Texas...dumping HRSH - Breakeven EPS but sees a drop in multihead machine sales....dumping BSIS - Little or no profit in 1stQ because of a postponement of major pact....sees better action later in 98... CAMP - 4Q sales below a year ago... NWSW - .30 versus expectation of .14 Consider a BUY the first uptick!! OXHP - KKR adjust $600M of Ox Health... ISLI - 3Q Net beat views.... NEWS: News stories before the open are generally bought after a sell off at the open. I will buy the first uptick if I like the story but am cautious with stories that are not that great and have big gaps up (I will generally go short on this type of stock at the open). A stock that is gapping less than 1/2 pt. can be considered as a buy after a small pullback but if there is a gap over a dollar and over 10% I will consider it an open short(cover on a pullback of at least 3/4 pt.). The best open shorts are the ones that gap over 20% from the previous days price. In a very strong market cover the short at the first time you see the bid and ask stop downticking or on the first uptick wherever it occurs. BAD News is played like the first day dumpers. Look for a gap down or watch for a sell off for a bad news stock to hit the 20% decrease in price target then buy the bottom. SUMMARY: I wanted to bring to your attention OXHP which behaved like a classic good news trade. Pullback from the open of about 5/8 and a subsequent move of nearly a dollar off the bottom with very good volume. This is the type of activity that I look for on gainer pullbacks. I have read the News carefully on ISLI and I am still shaking my head over the selling action. I think ISLI would make an excellent longer term investment for those of you who do such abhorrent things. I feel ISLI will behave short term (3 days or so) much like a typical dumper but I think it will begin to climb and head back for new highs later on. Have you noticed lately that some very good stories are met with NO overnight gapping which tends to make you think that there is no interest?? Example is SYNT on Thursdays open. It was in my pre-market email with 4Q revenues up 46% and Net income up 247%. The stock did not gap up but climbed 2 bucks from the open!! I have seen a few of these and the way you must play them is like any potential runner, "BUY THE FIRST UPTICK!!" Not all stocks will run with good news and it is tough to be consistent but if you can keep your losses small you will indeed do well. NWSW was such an alert as I felt it had good potential thus the comment after the story , BUY the first uptick. It went no where but no big losses either!!!! We buy opportunity NOT SURE THINGS!!!!! If you want sure things join the mafia and bet on boxing matches....LOL I would like to go over my procedures for when : "MY STOPS ARE BLOWN" ..... As I mentioned in the previous email there are a few reasons for stops not getting executed and some are not your fault. When my stops are blown with no indicator prior to a downtick I do 2 things: 1. First reaction is to do a Market sell at the first downtick thereby incurring a larger than expected loss. A couple years ago I was trading WKGP which was a dumper. It was paused with HUGE buying at 7 7/8 x 8 bucks. I saw nothing but executions at 8 and felt very good that I indeed had caught the bottom and was about to make at least a 1/2 pt. There was a very nice uniform movement in the bid and ask as the stock traded down to the 7 7/8 x 8 bottom. All of a sudden the bid dropped to 7 1/2 with not ONE sell and I immediately SOLD taking a fast 1/2 pt loss feeling really sick at the time. I had a student who was also in the trade at 8 bucks and he held thinking it would climb back up. He eventually sold at a little over 6 bucks taking nearly a 2 dollar loss on the trade and I did not quite feel so bad about my 1/2 pt loss. He eventually lost all his money and quit trading. 2. If you are in my room and have a stop taken out and do not sell I will give you the percentages of the probability of the stock climbing from the next bottom and set a target accordingly. Lets say you miss your stop execution and find yourself down 3/4 of a point. The stock settles at a new bottom and begins to trade up. I will at that point try to sell with a smaller loss as it upticks wanting OUT OF THE TRADE. I cannot afford to ride through another newer bottom. I will accept the fact that I am in an exceptional trade as I do not miss bottoms very often BUT, when I do I will try to get out with a smaller loss or get out EVEN with the next oscillation up off the new bottom. I set my stop loss at the new low and execute it with ANY selling taking my medicine. Many times over the years I have seen stop blowers go down nearly 1 1/2 to 2 points and then recover to allow a smaller loss and you should take it!!! Remember we can NEVER estimate the percentage a stock will fall potentially as we see stocks like HRSH fall nearly 50% in ONE day. But, there is no substitute for KEEPING YOUR STOPS. I always put in a sell order on my screen immediately after buying with my exit price up. I adjust it as the stock climbs.... Trading is a very tough business at times and these rules are easily discussed after the fact. I know that but I also know that each error or mistake can be the best teacher to ingrain good trading habits. So I am the one who is attempting to ingrain good habits early in your trading career so you will lose a lot less than otherwise....... Have a good week-end......Ken

To: Ken Wolff who wrote (558)	2/22/1998 10:13:00 AM
From: Pete	Read Replies (1) \| Respond to of 2120

Ken, I've been going through this thread over the past week and find it extremely valuable. I'd be interested in knowing how to get a copy of your book. As I read about people trading on published news stories, I got to thinking of another possible source for short candidates. In my earlier "investing" days, I used to get excited about companies mentioned in Investors Business Daily New America page. Like many others, I'd buy a few shares on the day the story came out. Many of them gapped at the open and would settle back within a few days. Since I couldn't spend my days watching the tape, I usually got "stuck" in the stock for a while, and sometimes had to bail out a significant loss. I know many people here are day traders, so holding overnight is not common, but the pattern I was in got me thinking that I would be better off shorting these companies at the open or later in the day, after their short ascent upward. Covering even a few days later would allow me to short-term trade even though I couldn't watch the tape during the day. Has anyone else use this news source in short-term trading? Pete