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139 posts
msg #41026
Ignore BFreshour
2/6/2006 4:45:48 PM

Everything changes. I know, I know. It's not wait you trade but how you trade it. I'm a swing trader, not a day trader. Everything I try seems to be going to shambles... What's the point of TSF(50) through the DMA(28,-14)? Does it actually work? Does it really make a difference if the slope of DMA is positive or negative when it crosses? Does Mike Parker's method even work? Nothing is for sure in this market.

Anyone care to take a look at FLSH using RSIWRL display and tell me what's gone wrong? I entered the day of the bounce and have been getting hammered ever since.

It's not like FLSH is a poor growth stock. It has one of the lowest PEG and PE ratios in its sector, well below that of MU and RMBS (each up 7% today and trading at a PE well over 100).

I'm not down too terribly much but I've just had it. Every attempt I make at implementing something others seem to use flawlessly works against me. How are people making money in the markets?

I started trading again (for the first time in years last November). I put up a measely $500 and before 12/31 I had gained $937. I payed taxes on that gain... since then? I've had one successful trade (JNPR after they hit $17 on their earnings), but I'm down to $200 account value.

Anyone with a brain and some wisdom care to impart some on me?

37 posts
msg #41035
Ignore Way2Late
2/6/2006 8:48:48 PM

Sounds to me like you're trying to make too much too quickly. Nearly 200% return in 2 months is phenomenal, but it takes a high degree of risk to make that kind of return. When you take that much risk, you will inevitably get some drawdown, a few trades that donít go your way, and poof, back where you started.

Trading is all probabilities, like a casino. The best traders are like the house, they know the probabilities of each trade they make, they donít risk more capital than they can stand to lose given the probabilities of each trade, and they have strict stop loss and profit targets. I believe over time itís difficult to have over 60% winning trades, Iím not talking weeks or months, but years.

The important thing is to figure out a system. Know the odds. Start small so you donít lose all your money in a few trades. Iíve spent hundreds of hours the last 2 years working on different systems, made 33% in one month, only to lose it all in 2 trades that went against me.

If you have a streak of 10 or 15 winning trades, itís also possible to have that many that donít go your way too.

Trading too large a position will cause you to be emotional about the trade and any gambler will tell you ďscared money never winsĒ.

Read the book by Mark Douglas, ďTrading in the ZoneĒ. Do the exercise till you get it right.

Most sites Iíve seen tell you that a 20-25% return on your money per year is a good return. My wife has made 60-80% each year for the last 4 years. Each year her system has had between 50 and 62% winners. She takes a 10% profit if she can get it, and a strict 3% stop loss. So I know it can be done.

Good Luck

6,362 posts
msg #41042
Ignore TheRumpledOne
2/7/2006 12:05:07 AM

"Anyone care to take a look at FLSH using RSIWRL display and tell me what's gone wrong? I entered the day of the bounce and have been getting hammered ever since. "

Nothing went "wrong"!


139 posts
msg #41053
Ignore BFreshour
2/7/2006 8:39:48 AM

Way2Late: Yea, I had some early success after paper trading this system and I thought I had a plan figured out. When I had 4 quick trades netting me 200% I was ecstatic. I entered another trade that was taking a while to play out, but I was still confident it would head my direction. Then the stock was upgraded and it shot through the roof. I lost $900+ on that one stock so I was, like you said, right back where I started after one trade.

TRO: Right on, I know, I know. Anything can happen and we should probably say 'will' happen. At least if it involves me... ;) Thanks for all your filters and help.

I believe my plays are a little bit risky just because they are all option plays. I'm going to re-group and try to gain my composure and see what happens. Most likely look for an exit on FLSH soon... Thanks guys.

37 posts
msg #41055
Ignore Way2Late
2/7/2006 9:07:33 AM

On FLSH, when it went below 27.82 (the low on 01/27) that would have been my signal to get out.

Technically it's not looking good, the Stochastics (5,3) are making lower lows so it could easily keep going down. Of course Technical indicators are only that, indications of probabilities of which way the stock is going to go.

What is your stop point?

2,025 posts
msg #41059
Ignore alf44
2/7/2006 11:47:55 AM

"I believe my plays are a little bit risky just because they are all option plays."


I know nothing about your "system"...but, I have a very strong hunch that your "system" consists of BUYING PUTS and CALLS !

BUYING options is largely a losers game ! fwiw

Most option BUYERS lose money !

These are DIRECTIONAL plays.

You have to be RIGHT on the DIRECTION...but, even MORE have to be perfect on the TIMING or the TIME DECAY will eat you alive !!!

A theoretical pricing model (Black-Scholes etc...) to help with pricing and volatility (both historical and implied) calculations is an absolute must but...HELL...even the bid/ask spreads with options can be a very tough obstacle to overcome !

Good luck with that !

You're gonna need it !!!



PS. You wanna be a successful option trader ? WRITE em don't BUY em ! Maybe try Spreads (I like Credit Spreads) ! Credit Spreads allow you to have TIME DECAY work FOR you...not AGAINST you ! Maybe try some Straddles and Strangles where "DIRECTION" is not an issue (at least not as much an issue) ! These are a bit more conservative option plays but at least you know going into the trade what and where the important numbers are. You can precisely "PLAN THE TRADE" ! Try some of these and THEN you will have a "system" !

2,824 posts
msg #41062
Ignore nikoschopen
2/7/2006 12:16:54 PM

"RSI(2) < 1" filter should be treated as a day trading vehicle. That is, you should be in and out of the stock the same day. If you think about it, anytime an RSI is below 1 the stock is usually is hovering just over its grave -- a great opportunity for vultures to swoop down to feast on easy prey. But keep in mind that it uses 2-day as its parameter. Don't bet ure shirt that the damn stock will come out alive in one piece, especially after just 1 day of recovery.

139 posts
msg #41063
Ignore BFreshour
2/7/2006 1:28:21 PM

alf44, my first few plays were directional buys of puts/calls. Since then, I've decided that's not the way to go and I'm using spreads. Selling one high volatility call/put and hedging it against another to limit my loss.

I agree that RSI(2) < 1 is a day traders tool. However, MP's method doesn't seem to be strictly limited to day trades. Most of the stocks it returns are good for 3-5 day runs.

Way2Late: Again, I agree with you that I should have stuck with the 27.85 stop I had placed, but I let it go without selling (emotional mistake). It made a huge run all the way back up to $27.70 this morning only to lose to all back on very light volume.

I'm not a technical analysis expert, but to me it doesn't make sense for a stock to increase on large amounts of volume and fall the same amount of light volume. What exactly is this stock trying to tell me, other than it's being manipulated by day traders (most likely)? And that I'm an idiot for staying in it...

alf44, my current trade is a Bear Put Spread, but because the stock has moved so much in the other direction, no amount of time/volatility value is going to offset the direction (however it is helping me from losing my entire butt). ;)

37 posts
msg #41064
Ignore Way2Late
2/7/2006 1:55:40 PM

One of the things Mark Douglas talks about in his book is the fact that when you have a trade go against you it's human nature to look for things that will justify your position, looking at indicators that you rarely use, looking for anything that will verify in your mind that you're on the right side of the trade, while ignoring the signals that show clearly that the trade is no longer working.

I think the biggest problem is the risk in relation to your account size. I believe I've seen somewhere that you should never risk more than 10% on any one trade. Daytraders use even smaller amounts, 3% per trade would be a big risk for me. But it's tough to get 100% per month returns with that little risk. Otherwise Fund managers would be making a killing.

Knowing the probabilities of each trade, Strict money management, a solid methodology to be able to pull the trigger when you're down. That's a few of the things you have to get a handle on.

Hope it all works out.

139 posts
msg #41066
Ignore BFreshour
2/7/2006 2:31:47 PM

Way2Late, I had come to terms that in order to get my account built up I was going to have to risk 100% at the start, especially starting with only $500. I could have started with more, but I hadn't traded options before ever and wanted to limit my risk and just play around and have fun. After my early success, I was certainly having fun; now I'm just aggravated. ;)

I had assumed once I got up to 2k (which didn't happen), I'd limit myself to $500 per position and see how it goes. Unfortunately, I was still betting 100% of my capital trying to get there (after I had made $900+) when I had a bad trade. And *poof*, there went everything.

I'm content right now to let FLSH ride; my options don't expire till April and it's an extremely good growth stock. If it doesn't come back, I'll start studying more and keep paper trading until I find something that I can do. Hopefully next time I'll set proper losses and not let my emotions get involved.

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