Saturday, March 19, 2011

Back to the drawing board...

OBSERVATIONS (STOCKS IN PLAY):
  • The best moves generally happen in the first hour (morning spike) and in the last hour (end of day runs) of the trading day;
  • Mornings spikes are more frequent than end of day runs;
  • Morning spikes often have steep reversals intra day and so are less reliable for holding over night than end of day runs (i.e very few stocks stair step higher through out the entire day after a morning spike);
  • Morning spikes and end of day runs are generally most powerful on the first day of a new short term move;
  • Beaten down stocks bouncing back generally make bigger; cleaner moves than stocks breaking to new highs during corrections and bear markets!
  • The intra-day market trend generally has little impact on the trend of an in play stock.
ADJUSTMENTS TO MY TRADING PLAN:
  • From now on, I will only open new positions in the first hour (9:30am - 10:30am) and last hour (3:00pm - 4:00 pm) of the trading day;
  • I will look to trade end of day runs more often than morning spikes since end of day runs are more reliable for holding over night (i.e better predictors of a gap the next day) than morning spikes and will therefore consume less day trades;
  • If I do take a morning trade I will look to exit by some time around mid-day except in the rare occasion the stock stair steps higher for the entire day;
  • I will give preference to set ups that are in day one of a new multi-day move versus stocks that are currently on later days:
  • I will also give preference to beaten down plays vs. stocks breaking to new highs during corrections and bear markets.
  • When determining risk/reward, I will give more weight to the set up in the stock and less to the market's intra day trend.
So there it is folks. Some adjustments that I will make to my trading process starting next week based on the $171 lessons (trading losses) I have paid for over the past three weeks!

I hope you can use this info in your own trading. Good luck next week!

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