Friday, January 11, 2008

What is My Trading Niche?

I can't handle overnight trading. At least not any time soon. It makes me way to anxious. Wanting to stay up all night watching the US market. And then making bad decisions when I am tired. This morning I had the debacle of the stop order I forgot about. Now this afternoon I ended up selling out of the Australian market at the low point of the day (so far). I had the wrong type of warrant. These are so called "barrier warrants" that are delisted if the index hits the exercise price. They trade similarly to futures with a hard stop at the exercise price. But the price even a few points above the barrier is more than would be implied by the simple points difference between the current price and the barrier. The index fell to a a few points above 6000 and so I sold the warrant. Of course the index never got quite to 6000. It did go as low as 6000.2. And then it rebounded. So I sold at the worst possible point. I should have had a regular option style warrant or one deeper in the money. All the regular warrants are out of the money. The reason we even got near 6000 without me selling earlier is because I was in "swing trading mode" with the model set stop of a 1.25% loss. Last night I stayed up till after 4am watching the US market because I was anxious about the market. I can't go on like this. I know logically that the model in the long run makes money but I can't handle the short-term fluctuations unless I am staring at the screen. With daytrading, you can choose when you want to trade and when you are not trading just ignore the market (except maybe thinking about the opportunities you are missing). Maybe after daytrading for a while I can get back to swing or overnight trading, if I can build up some profits first. So next week I will be back to papertrading SPI and Nikkei daytrading and maybe again doing some real US trading either in the evening or early morning (no overnight Australian time position). I'll hold my positions in US stocks and options until the model says to sell them. I do seem to be able to handle those mentally for some reason.

I can use the model to decide on whether to look for long or short trades, but not be too wedded to it. I thought that econometrics based modeling is where I could have an edge in trading, but my psychology, at least at the moment, doesn't seem to be able to handle it.


I was stopped out of my Nikkei trade too. Oh well. I have some ideas about what to do with the model along the lines some commenters have occasionally made. Sorry to be cryptic. But for now I am a daytrader (as well as an investor).

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