Wednesday, August 10, 2011

Risky investors, conservative daytraders

I remember discussing the stock market with someone who thought I was a risky trader, what with being a daytrader at times, along with trading on longer timeframes. Well, it is this kind of action that makes me feel like the most conservative flavor of trader. I took on a long trade at the close yesterday (PSEC 8.01, pays a huge dividend monthly, +10% annually), and it flopped around my entry price today and closed down at the end of the day. That gave me the foul taste of what it is like to be holding positions in this market, and I bought near the current bottom. Can't imagine the anguish I would be feeling if I was well underwater in long term holds. The PSEC is a small position, and I will likely take more long positions if/when the market snaps back. One should only be nibbling down here, if holding at all.

Contrast the above unsavoriness with my daytrading:


Note that the NUAN play was not on my morning list. I have been using the Madscan scanner, and had it set on the "gapping higher and near highs" setting right at the open, and NUAN popped up. It was early in the day, and so, according to my trading plan, I traded 1/3 normal size and scalped it. Fortunately it ran like a scalded monkey and I got 4% in minutes. Hedge fund managers years can be made on 4%. Unfortunately for them they cannot churn millions through a stock like this without blowing it up, an important edge for the small lot trader.


This was a good daytrading day, as the market was fairly stable until the last hour. Even with the DOW down 300 points mid-day, it was really just chopping about, and this provided enough support for the high volume movers to work on their own with the rug being pulled out from under them (as happened in the last hour or so).

So I will give this damn PSEC more time to work, but I do feel I made a mistake not selling after it failed at 8.10; should have sold at 7.99, it had no business revisiting a 7 handle. This action re-affirms my distaste for bottom picking. If the market was up-trending this would not be an issue as time usually irons out poor entries, but watch this market drop another 10% before a violent snap back rally; but that is just guessing. We'll see.

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