Wednesday, May 20, 2009

Managing your risk in day trading

Brett Steenbarger has some excellent suggesions.
"Never lose so much on a single trade that you can't come back and be green for the morning or afternoon;
Psychologically, it's healthy to experience defeat and then overcome it. It strengthens you to battle back and win. If you lose the wrong way--by taking so much risk that you can't come back for the day, week, month, or year--you rob yourself of the victory that could be yours by going from red to green."

What happens after strong upside Momentum Days?

Larry Connors in his book "How markets Really Work" has done a lot of study on market behavior after big up moves. His conclusion is that the market takes rest for the the next week or so. New gains come after at least a week.
This tells us:
After a big up move, buying on further breakouts may not be profitable since such breakouts could be quickly followed by declines.
Selling short in NOT profitable since the markets will resume their advance, most of the time, after a pause.
Buying on dips seems to be a safer method of trading the market after a big up move.

5 comments:

men said...

Hi,
Can we expect the same up move here after expiry? Personally I feel it was a bit overdone, accepted the range may be 3800 or 4100 and up. Kindly let us have your trading range once things settle. Thanks

afzala.com said...

your judgement about market more or less correct
please tell what a retail investor to do at this time who missed this rally

gurvi said...

I was holding RELIND which I bought 8 months back at 2100. I sold all my shares at 2300 y'day.
Now should I enter at this level (2100 Closing price -Tue)

Please let me know your thought on this.
Thanks.
Gurvinder

men said...

Mr. Sudarshan,
Do we condisder the rates of 18th Monday, in our analysis. Also it has been observed that some stocks have abnormally hi/low then what about these quotes? For my study I have considered tradeable quotes only, but for historical purposes this is not possible.
Secondly your page comes late when viewed from vfmdirect.com site.Thanks

men said...

HI,
Does trading time wise on fiboancci/gann work, and could you please explain how.
Thanks,