Friday, July 9, 2010

No longs but one new short...

I closed out my positions in both CRME and LCAPA and went short 200 shares of PWRD @ $24.36 with a tight stop loss just above $25.00. I am looking for a move down to $22.44. I have come to realise that trying to hold out for longer term moves does not make much sense in this volatile market. This will likely lead to a slow painful drawdown. What I am trying to do now is to take larger position sizes with tighter stops but look for quick 1 - 2 day bounces or pullbacks in stocks in well defined (long and intermediate term) down or up trends.

Usually I prefer to wait for confirmation when I am taking swing trades. However, after moving straight up for 7 days in a row in a well established long term and intermediate term down trend the odds of atleast a 1 day pullback in this stock in a very weak sector in this over bought overall market is very high a more than worth the risk. I am only risking about $130.00 on this trade including commissions. Besides if I get stopped out I will have a second chance to re-short with an even higher probability of success.

The way to go in this current environment is squeeze out small gains and slightly smaller losses but with gains out numbering losses by about 2:1. Ordinarily I do not mind my losses out pacing my winners by 2:1 or more. However, that ratio can only work in environments when one can hold out for big winners. 2009 was one of those years and early 2010. However, this volatile market environment which more closely resembles 2008 is more suitable to day trading and extremely short term swing trading as I am attempting at the moment.

Good luck and good trading!

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