wallstreetsedge
06-14-2008, 12:32 PM
ok so yesterday, netwrangler and i were in the chatroom and he unveiled some of my secrets and i came spilling out more info on why i do some things... well i wouldnt say secrets, but no one ever really asked me so i never really went into detail about it.
we saved the conversation and i decided to clean it up and share with you all on why im successful more than 90% of the time when it comes to day trading....
a side note before i begin... many of you will notice that i prefer to buy puts rather than options. i would say 70% or 80% of the time, i will buy puts vs calls. why? think about this, how many times have you heard panic selling compared to panic buying? how many times do you see stocks move down 5% vs up 5%? also arent moves down more steady vs upward swings which shoot straight up and then fall back down?
here are some of my concepts and i hope you all enjoy...
1- watching a small handful of stocks...
why is this important?
- when you watch a small handful of stocks, you begin to become more familiar with the way they trade. when you become familiar, you increase your odds greatly in terms of winning. the number of stocks i watch always varies. normally i have 2 windows open, 1 contains about 5 stocks i watch every day and the other contains 5-10 stocks im considering to trade. most people will have 50, 100, or more symbols that theyre constantly scanning which is extremely time consuming to me. if i have 5 or 10 stocks im watching all day, i'm sure i can find at least a few good moves to exploit.
2- the stocks i choose are very popular, have high volume, and contain options which also have high volume...
why is this important?
- the answer here is simple my friends. when you first start out day trading, most day traders will tell you one thing first... start trading on the nyse. why? because the stocks have high volume, which makes them highly liquid, and will contain smaller spreads between the bid and ask.
3- the stocks i choose are at least $50...
why is this important?
- to me the answer is obvious. to most people, even professionals, it isnt. a lot of option traders and even professionals who make millions of dollars each year selling their services dont take into consideration the importance of this. think about this... if youre playing an option and the spread between the bid and ask is the usual 10c or 15c... what kind of % is that on a $5 stock vs a $50 stock? on a $5 stock, thats a 2% or 3% move! on a $50 stock, its a .2% or .3% move, after that move, you're in profitability my friend!
4- buy at the bid and sell at the ask...
why is this important? again, this is something many people over look but where it can make a big difference between a winner and a loser. when i buy, i buy at the bid and when i sell i sell at the ask. sure, it's simple but the concept that everyone has is... i'm going to play options and make a boatload of money. most people dont realize that if youre simply buying at the ask and selling at the bid, you could be creating huge handicaps for yourself. a concept that i always take into consideration is that if i miss the move then fine, but i'd rather miss the move than to be put at a handicap.
5- % doesnt matter! patience is key...
the final and most important piece of advice is this... when i trade, i will ONLY trade if the odds appear in my favor 99% and i believe that my success rate is guaranteed.
many people will trade simply to trade and others will trade only if they believe they can get a minimum percentage out of the trade.
when i trade, i dont care what the % is as long as it covers the commission. also when i trade, i believe that the money could be used for other things and unless i truly believe that i will make money on the trade, i wont even consider hitting that buy button!
if you were to come to my home or office and watch me trade, you'd be surprised... ill sit in front of my laptop or desktop all day during market hours and ill wait. i will only place an order if the opportunity comes to me. i will never go looking for the opportunity - which ties into rule #1. on some days, i can sit in front of my computer and place 1 or 2 round trip trades if any! other days you might catch me placing 10 or 15 round trip trades. opportunity is key!
i hope all of you benefit from this post and use what i stated to your advantage. if you combine these with your personal trading systems, i have no doubt that you'll be successful.
and a final note before i post this... if you have NO concept on how a stock trades, DO NOT TRADE THE OPTION!
we saved the conversation and i decided to clean it up and share with you all on why im successful more than 90% of the time when it comes to day trading....
a side note before i begin... many of you will notice that i prefer to buy puts rather than options. i would say 70% or 80% of the time, i will buy puts vs calls. why? think about this, how many times have you heard panic selling compared to panic buying? how many times do you see stocks move down 5% vs up 5%? also arent moves down more steady vs upward swings which shoot straight up and then fall back down?
here are some of my concepts and i hope you all enjoy...
1- watching a small handful of stocks...
why is this important?
- when you watch a small handful of stocks, you begin to become more familiar with the way they trade. when you become familiar, you increase your odds greatly in terms of winning. the number of stocks i watch always varies. normally i have 2 windows open, 1 contains about 5 stocks i watch every day and the other contains 5-10 stocks im considering to trade. most people will have 50, 100, or more symbols that theyre constantly scanning which is extremely time consuming to me. if i have 5 or 10 stocks im watching all day, i'm sure i can find at least a few good moves to exploit.
2- the stocks i choose are very popular, have high volume, and contain options which also have high volume...
why is this important?
- the answer here is simple my friends. when you first start out day trading, most day traders will tell you one thing first... start trading on the nyse. why? because the stocks have high volume, which makes them highly liquid, and will contain smaller spreads between the bid and ask.
3- the stocks i choose are at least $50...
why is this important?
- to me the answer is obvious. to most people, even professionals, it isnt. a lot of option traders and even professionals who make millions of dollars each year selling their services dont take into consideration the importance of this. think about this... if youre playing an option and the spread between the bid and ask is the usual 10c or 15c... what kind of % is that on a $5 stock vs a $50 stock? on a $5 stock, thats a 2% or 3% move! on a $50 stock, its a .2% or .3% move, after that move, you're in profitability my friend!
4- buy at the bid and sell at the ask...
why is this important? again, this is something many people over look but where it can make a big difference between a winner and a loser. when i buy, i buy at the bid and when i sell i sell at the ask. sure, it's simple but the concept that everyone has is... i'm going to play options and make a boatload of money. most people dont realize that if youre simply buying at the ask and selling at the bid, you could be creating huge handicaps for yourself. a concept that i always take into consideration is that if i miss the move then fine, but i'd rather miss the move than to be put at a handicap.
5- % doesnt matter! patience is key...
the final and most important piece of advice is this... when i trade, i will ONLY trade if the odds appear in my favor 99% and i believe that my success rate is guaranteed.
many people will trade simply to trade and others will trade only if they believe they can get a minimum percentage out of the trade.
when i trade, i dont care what the % is as long as it covers the commission. also when i trade, i believe that the money could be used for other things and unless i truly believe that i will make money on the trade, i wont even consider hitting that buy button!
if you were to come to my home or office and watch me trade, you'd be surprised... ill sit in front of my laptop or desktop all day during market hours and ill wait. i will only place an order if the opportunity comes to me. i will never go looking for the opportunity - which ties into rule #1. on some days, i can sit in front of my computer and place 1 or 2 round trip trades if any! other days you might catch me placing 10 or 15 round trip trades. opportunity is key!
i hope all of you benefit from this post and use what i stated to your advantage. if you combine these with your personal trading systems, i have no doubt that you'll be successful.
and a final note before i post this... if you have NO concept on how a stock trades, DO NOT TRADE THE OPTION!