Sunday, January 30, 2011

My trading plan for 2011...

When I resume trading my personal account I know that I will be below the $2,000.00 required for margin for at least a couple weeks. Since I do not plan to trade options, I will be restricted to taking long positions only. However, by the start of March, I should have added enough to my account so that I will be able to trade margin by then. Then I will be able to trade both sides of the market. If it means that for a few weeks I will not be able to trade because the trend of the market is down as I believe its going to be then so be it. My concern is firstly, the preservation of my capital and then its growth.

Secondly, even after passing $2,000.00, I will be way below the amount of capital required to be qualified as a pattern day trader; $25,000.00. This means that I will be restricted to taking no more than 3 day trades in a five day period. So this means that the majority of my trades will have to be overnight holds. Hence the first part of my plan is to focus on swing trades (multi-day holds). Also I will use the day trades for set ups that trigger and stop me out the same day and for trades that make an unprecedented huge move in my favor on the day of entry and I no long feel the risk/reward merits holding on to the position.

So all in all for the next 12 months or so my focus will be locating and buying/selling stocks at the start of multi-day momentum bursts and exiting into momentum. Now from my observations, huge multi-day moves that can be traded with an edge occur when beaten down "penny" stocks experience short squeezes and/or are pumped up by stock promoters; "penny" stocks being dumped after up being pumped up 100%+, neglected/unknown stocks announcing unexpected or better than expected news (earnings related, FDA, new products, shortages...etc); and high momentum stocks breaking out after short term pauses/pullbacks.

My general focus will be on hyped up "penny" stocks and low priced momentum stocks breaking out of chart patterns (like cup with handle, flags, pennants etc) like CCME on Thursday this week which I tweeted as a buy on Wednesday evening. However, during earnings I will narrow down to stocks that are breaking out of these same patterns due to some earnings related news. For example, BLTI pushed above $2.00 and broke out of a nice cup with handle base on earnings news this week. This trade was good for close to 50% in a couple days if timed well. Earnings add fuel to break outs! I do not plan to trade to many "penny" stocks that are in the dump phase as Timothy Sykes does. I do not like this strategy. However, I do plan to educate my self about trading Bio techs which I generally avoid.

So my focus will be on trading momentum break outs and earnings based break outs during earnings season.

I will get into my daily routine, screens, hardware and software I plan to use, sites I use, patterns I look for, entries and exits, risk management and position sizing aspects of my plan in the future. Right now I need to stop thinking trading!!!

No comments:

Post a Comment