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Day trading, and taking losses

Day trading is very hard.  The work done well is consuming and mentally draining.  Wallstreet tries to make money on every trade, and made a cardinal mistake this life time.  Being overly overlyaggressive, and continually attacking the weak.  That is not using our minds to most effectively.   The long term view, and helping other’s is of greater importance in my mind. 


Topstockblog has worked to focus on learning from my mistakes, and growing as a trader. 

(updated old trading notes from January 31, 2008)

Picking my battles, and limiting my losses needs to be the lesson learned.   I still like the short in COF.   The bulls’ made a great argument today.  COF has recently crossed above its 50 DMVA and bottomed with excessive volume around 40.   I could have covered my short with a long hedge.  A straddle would have worked well.  Short sellers  covered, and buyers bought.   The after hours news was icing on the cake for a bull.  Could mark the top in after hours. Rebuy doesn’t start until 2nd half of the year and the debt level ratios were mentioned indicating of more erosion of ratios in my pessimistic hope.  Really interested to see the jobs report in the morning.  More data points are going to make things more clear.  Deterorating loan quality and rising defaults are at the heart of my short sale argument on COF.   It is very difficult to day trade market successfully.  Seven tips I’d like to consistently remind myself of.

1.  Limit position size  – position size is critical to reducing being overly biased and too consumed by a single trade.  My return will be negative in the long run if I add to losing positions and over invest in a single idea.

2.  Focus on  making money in a competitive environment – Look at all angles of a trade.  The 50 DMVA shows you momentum and should adjust perspective to work with the crowd.   Identify who is buying and selling, watch the market for clues, and look for real reasons for a directional move in a stock.  Its not about feeling good or bad about a position.  It’s not about stress or lack there of.   It’s about making money.  “They are who we thought they were!  We let ’em off the hook!” Atlanta Falcons head coach after a bad game.

3. Good judgement is the ultimate winner in any market   I will be confused, and trading will be challenging.

4. Buy low, sell high.    Common sense

5. Sell high, buy low  – Common sense

6. Spread my money out more broadly – near delta neutral or at least a single bet long and short.

7. A percentage of funds in cash ensures flexibility to meet oportunity

8. Set stop losses to get out of a position when a stock does not act as you had hoped.  A maximum percentage loss when you will exit a trade. 

9. Reposition the trade to make extra profits.


Entertainment, and educational purposes,

October 1, 2008 - Posted by | Stock investing links, ideas, and opinions. | , , , ,

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