Tuesday, August 2, 2011

I fought the shorts and the longs won.

I am very bearish the markets, the shorts are winning the battle right now, but all that matters to me are the little skirmishes I am involved in during the day. I have very little overnight exposure, and am focusing on day-trading only. I traded long today and did quite well playing earnings gaps. These stocks trade such high volume that they can move almost independently of the market, even on a down-trending day like today. Here is a screen shot of every trade I made today.

note: the CEF trade was just one trade broken up into lots. same with one or two others that were within a penny or two. all my day-trades are closed, no overnights.

I trade with some people whose winning trade percentages are well over 75%. That is not me. Notice I only had roughly a 50% win rate today, but my gains far out performed my losses. This is a very good snapshot of my current day-trading style, which I would say is: positioning my trades in the most volatile moments of the trading day and almost immediately getting out if I am wrong, and letting the trades work if they move up. The difference right now is that I am scalping more than I am letting the trades work, or just scaling out in larger fashion, and letting only a very small position continue trying. Its just that kind of market. When these stocks are fighting poor internals you just cannot give them any room. In RDN and MHP, for example, I only had 1/8 positions left to really work after scaling out on each advance. You can refer to my past posts with charts on how I do my entries and scale outs. My entries were simple breakout plays off the first minute bar, or a clear lower resistance level that lead to a intraday breakout.

My trades in the first 15 minutes are true scalps, the moment the stock turns down I am out. This is a rule in my trading plan. The H and CVLT losses were larger, price-wise, than the other trades, but these were very small positions that I projected to go very far and not scale out but just sell the whole lot at my price target. Neither worked for me (though CVLT did end up working, just not with me aboard).

The key to getting into these is the pre-market work: finding the stocks that are gapping up with volume; noting any resistance whether it be a price level or MA; knowing the difference between kickers, continuation gaps, area gaps, etc; making sure the volume once the stock is trading is indicating a big day, and prioritizing so you can be attacking the most likely trades off the first minute bars for initial scalps, and then taking more time later to analyze how others that have not yet moved yet are shaping up and determining entry levels and position sizes, and, most importantly, exits in case your trade goes the wrong way.

I have to thank John Lee for teaching me all this. I have said it before, and I will say it again, get a coach, all successful people have one, from the president to top athletes. It took me a long time to learn that being a lone wolf is not the way to go, a lesson I wish I had learned far sooner.

Lets hope this market can find some support and maybe work on getting to new yearly highs as I would like to be back into making swing trades, and even blogging on them as I realize I have not done much of that. If not, my swing trades may end up being to the short side. That has been the right play the last two weeks, but I am never as comfortable short as I am long, so it's day-trading for me right now.

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