Saturday, February 20, 2010

New Lessons

I have learned two important lessons from my recent trading.

The first is to wait for the markets to open before placing buy stop orders. The reason for this is the bid-ask spread in the first 5 - 10 minutes of trading is usually extremely wide especially in small, think stocks I tend to trade. So a lot times you end up getting executed way above the price you intended to get. There have actually been instances (with Zecco Trading) where my order was filled above my trigger price seconds before market open but the stock ends up never trading above the trigger for the day. Then I get stopped out because there was not a real "confirmation" signal. This was the reason for at least three of my losing trades.

Secondly, I have learned that I need to be extremely selective with the trades I take. Some of the trades I took did not fit all of my criterion. Invariably my best trades are the ones in which everything lines up and my worst the ones in which I bend the rules.

Its very important to constantly review the cause and frequency of your losses and/or lack of big wins. These two factors influence expectancy and if you can push them a little bit more and more over time your profitability should improve markedly.

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