Thursday, December 09, 2004

The Market and System Trades

It's thirty minutes into trading on Thursday and the market is very weak this morning, due to some semi talk about weak business. This spells opportunity for short-term trading. It is much easier to make money buying weakness-turning-to-strength, then buying strength-turning-to weakness. Thus, the first part of that equation, Weakness, is now in place. If the market turns up now, our system trades should work out quite well. Oh, yea, most important of all, we don't trade anything without a system trade and if we get a system trade, we take it, no matter what shape the market is in. So why even consider market weakness verus market strength?

We consider it only in the context of the size of our bets and the length we are willing to stay in a trade. In other words, in a very weak market we might take smaller wins on reduced sized trades. In a booming rally, we might be willing to stay a little longer at the party and make more sizable bets. This is the one subjective aspect of my day-trading, overall market conditions effect the trades, on size, on profit taking, but almost never on whether or not to take a system trade. We take them all.


ilene said...

Hi, Allan. One small additional thing is that at least occasionally someone takes "non-system" trades and doesn't call them "system" trades. Telk (true insider trade this morning) is probably not working because the market is still very weak. So, if taking all trades gets you in, getting out isn't clear cut, particularly since the insider trades have a time-frame beyond a day. I can't predict which ones will come through and which won't. (see pzza.) I just looked looked at telk, and in the time it took me to write this, it has gone up to the first price I bought it at, after which I got out, started researching the company, decided to buy it back, put some in a buy and hold account. Greg -- this is where you really have to get a feel for it, and I am still guessing.

Allan said...

Hi Ilene, yes, categorizing day-trades that don't work out as buy & hold stocks does tend to make the day-trade statistics shine, but there is also the delusional aspect to consider. :-)

ilene said...

maybe, we should write down a list of all delusions that can come up, because that's just one

Greg Reiman said...

I just had a chance to read today's posts which were from early in the morning session. The markets took a nice upward swing just before noon CST (10:00 am PST) and continued in an orderly fashion until the close. How did your trades work out today, I am guessing that a nice dinner out at a fancy restaurant is in order?



Allan said...

Hi Greg, Just got in from ice skating, my usual after-market-stress-relief activity and my only way to deal effectively with the real Northwest winter after living in the South for thirty years. Great work out! What were you asking? Oh about today. Yes, the market strength led to a few very nice system trades and just anticipating the scenario in my early Blog help to prepare me psychologically for what was to follow. In other words, I made the most of what was handed to me this afternoon.

"I am guessing that a nice dinner out at a fancy restaurant is in order?"

Sometimes we celebrate a particularly good trading day with fine dining, but think about it, do we really need an excuse to be elegantly pampered? A really nice night out, fine food, a California Cabernet (or a Washington State Merlot), finished off with a light and rich Tiramisu is an end in an of itself, the reason, the cause, the celebration of breathing successfully through another day. Yes, we made some bucks today.