Monday, December 06, 2004

Monday, Monday

Monday, Monday, can't trust that day,
Monday Monday, sometimes it just turns out that way


Halfway through Monday and I've gotten only one system trade so far, a profitable position in PNR. But I'm down on the day due to a couple of non-system trades, taken out of boredom. That's my Lesson of the Day, be disciplined. If you have a system that works, trade it and if you're bored, make a bowl of Tofu dip, or do a Google search on "Day-trading," or re-arrange a closet. Sometimes, not trading is as important to your success as everything else put together. This blog is a keeper.

6 comments:

Greg Reiman said...

Hi Allan:

I have been thinking about the same topic. Why not sit on the sidelines until you identify what I'll call a "Big Casino" opportunity? Then put a much bigger chunk of your trading capital (maybe all of it) on the kind of trade you are more confident in. Risking a bigger chunk of change on one trade would intuitively seem riskier. But, if you are trading only when you are surer of a positive return and less often when you aren't as confident, then is it really riskier? Instead of 5 or 6 trades a day, maybe you do 5 or 6 a month. I am just thinking out loud, and not even sure I agree with this myself. What do you think?

Greg

ilene said...

Why not sit on the sidelines until you identify what I'll call a "Big Casino" opportunity? Then put a much bigger chunk of your trading capital (maybe all of it) on the kind of trade you are more confident in.

Hi, Greg,

From what I know of A's system, a lot, you would put more money in high-confidence trades, however, some of the best trades may surprise you. Also, low volume stocks may go up significantly, but you can't put too much capital to work without affecting the price. So there's no way -- since you also have to get out. Plus, low volume stocks are easily affected by conditions/sellers you don't know in advance. The safer trades have high liquidity, but may not move as much. Also, when you are deciding what to do, it is very difficult to weigh all the factors and accurately assess risk. But you are right about attempting to make these determinations.


Risking a bigger chunk of change on one trade would intuitively seem riskier. But, if you are trading only when you are surer of a positive return and less often when you aren't as confident, then is it really riskier?

No.

Instead of 5 or 6 trades a day, maybe you do 5 or 6 a month. I am just thinking out loud, and not even sure I agree with this myself. What do you think?

It's not that easy to know the risk level, but you are generally right. OTOH, you wouldn't make as much total return by being so selective, you'd miss some great trades.

Oh, you asked Allan. Maybe he'll answer too.

Greg Reiman said...

I attended a Christmas party this past Saturday and had a conversation about trading for a living with a very successful guy who is a partner at Stark Investments http://www.starkinvestments.com/(not that the web site tells you anything). They are a big hedge fund, located in Milwaukee, managing several billion $. Here are some of the tidbits of advice from this guy that I you may like:

He told me his daily morning meditation is to say 100 times "I am an idiot" just to make sure his ego is in check before he starts trading.

He said whenever one of his traders comes up to him and says "I love this trade" he cringes and replies, "love your wife, love your girlfriend, but never ever fall in love with a trade"

"The market is like music, get into the rhythm and sing along, don't try to sing a different tune."

"Don't try to predict what the market is going to do, let the market tell you what to do."

Considering the number of cocktails I drank, I think I did very well to remember all this.

Greg

Greg Reiman said...

Hi Ilene:

Good to hear from you. I think you are right when you say that it may be too hard to judge the risk levels and so you may end up filtering out some of the best opportunities that would have pleasantly surprised you.

I agree with Allan that having the discipline to stick to the system is an important lesson. That it is better to stay on the sidelines then trade out of boredom. I'm sure that is why he says this blog is a keeper, probably to remind himself as much as for the rest of us.

I plan on hang around here to learn more about Allan's trading system and to learn as much as I can from others such a s you. My goal is to be trading full time within two years.

Greg

Allan said...

Greg and Ilene, you probably can design a trading system to trade only 5-6 high confidence times a month, but my day-trading system is what it is, 5-6 trades a day and if you are doing it right, you have to take each trade. As Ilene pointed out, you never know when you are getting the fastball down the middle of the plate. But maybe more important is the fact that no individual trade is more important then the whole; my wins are across the board and my winnings reflect that fact. In other words, although I occasionally have a huge win, it's the cumulative effect of all the small wins that accounts for the system's success.

ilene said...

Greg, good to hear from you too!

"I think you are right when you say that it may be too hard to judge the risk levels and so you may end up filtering out some of the best opportunities that would have pleasantly surprised you."


When I started trading, one of the things Allan kept saying I was doing wrong was hesitating, particularly since I felt a need to check the financials on Yahoo before I got into anything.


"I'm sure that is why he says this blog is a keeper, probably to remind himself as much as for the rest of us."

Yes, definitely, me too. I tend to find small biotechs..... Maybe a sign above my computer "I am an idiot" would help.

"My goal is to be trading full time within two years."

I quit my part-time job to do this during market hours. First, I was trying to do both - work and trade - but wasn't very successful. It was too hard to focus on both at the same time. Allan makes it seem much easier than it is, so, what I guess I'm saying, is you need time to learn, to practice, and you sort of need to start well before you're needing to make a living at it.

Ilene