After my experiences over the last couple of months I have developed a new trading plan to try to implement a bit more discipline. This doesn't cover very long-term trades using mutual funds and changing currency exposure.
1. Only do short-term trades in my US accounts. This gives me a break rather than thinking I need to trade in both the US and Australia. Australia is only for long-term investment and long-term trades. The rationale is that it is more expensive and difficult to trade in Australia in every way (executing trades and getting real time information) and the market is less liquid.
2. Set up a position trade (i.e. for period of week, weeks, months) using options on QQQQ based on my own market timing model, E-Wave, and other technical analysis of daily and weekly data. The rationale for this is that options give some up and downside protection in the event of an unexpected market move (and stops won't really help outside the regular market day) and that option spreads (difference between bid and ask prices) are wider than individual stock spreads so that daytrading options can be difficult.
3. Set up a few position trades of small size in individual stocks. These should be less than 5% of net worth and probably smaller.
4. Do day and multi-day trades using stock in QQQQ and individual firms where appropriate. Use stops on these trades to weed out the losing trades fast. I don't have to day trade as I will have a position trade in place. Hopefully in a situation like yesterday I would have shorted the stock but kept a call options position. This would have mitigated the damage. Even better would have been not to go short at all till the end of the day :)
3 comments:
Hi Moom, Life has gotten to be very hectic and thus less pontificating on my part. I am very much a disbeliever in day trading as wou know. I think your new strategy should work better. I personally like my sector bet overweight and minor market timing philosophy. It has served me well coupled with a tendency to value over momentum. I have seen far too many momentum players blow up and the carnage chasing the hot idea du jour can do. Granted you have had pretty impressive returns but I like my good old reversion to mean value play and buy for a while and beware strategy. I know there's not a single data point to entice an econ prof but over time gut checks, avoiding craziness and good old value plays work. Incidentally, why the QQQQ, why not play an equal weighted index such as a powershare? With QQQQ you play a lot of the big names and not much else. I like the big tech though so what the hey...
Good luck and I notice networthiq has kind of died down to the point of boredom. I don't even have the energy to offend anymore. Let the whole oil pink sheet thing just glide by...
I hope you make some big coin.....
Hi Stealthbucks
Yeah, the owners of Net WorthIQ don't seem to be doing anything, which I guess has slowed things down in terms of people joining etc.
My strategy hasn't really changed, just been thinking how to separate the different trades on different time scales more effectively. Trying to use one trade to achieve more than one objective - a quick couple of hundred bucks on a daytrade as well as longer term more strategic direction just messed me. I use QQQQ because it is very liquid and has high beta, there is a long time series out there for the NDX and plenty of people discuss technical analysis of NDX online. I just recently heard about PRF. Interesting idea, more something for investing rather than trading at this stage I think.
Everyone needs to develop an investing and trading strategy that works for them, because psychology and discipline is such an important part of all this.
Interesting plan! Hope that it will work successfully.
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