Wednesday, January 12, 2011

Art Of Trading Member Asks A Good Question About Over Trading

A fellow ART OF TRADING Member asks:


My nice gains yesterday in ZAGG and CRUS were offset by taking positions in some of the setups from the night before: KSU, MWW, MTW, N, LOCM, SFN. I took small positions in all of these, and exited with small losses, but it adds up of course. And today many of them are up.. I'm trying to learn what I'm doing wrong, either I over trade and am too quick to take a trade, or perhaps I need to be more patient with my stops. Any advise?


-- M.D.

My Response:


This is a very difficult question to answer. But for me, the first thing that comes to mind, is WHY ARE YOU TAKING ALL THESE TRADES? How can you manage 5-6 trades at once when 1-2 already require so much attention. I know you are using small positions but 5-6 small positions equals 2-3 large positions with 5 times more anxiety and stress. Right?

I would much rather see you relax, take your time and really focus on proper selection and proper entry on 1-2 high quality trades than execute trades like a mad man in rush hour traffic. Look, when you are tracking my setups, your setups, Trader A's setups, Trader B's setups, Twitter Trader Z's setups, Stocktwits Trader X's setups all at once and numerous alerts go off at the open: That does NOT mean you need to take every single trade! RELAX, breathe and think for a few minutes. Ask yourself: Are all these setups really a BUY right here? right now?? Some are surely going to do well. Many are surely to flop.

Ask yourself: "Hey, are these too many alerts going off right now?"
Do i even need to track that many ideas? Probably NOT!
If i take all these trades, will i see a big profit at the day's end? Probably NOT!
At the ART OF TRADING, i always reinforce the fact that LESS IS MORE! The less you do during a trading session, the better off you are in most cases.

Over Trading is extremely DANGEROUS!

I suggest you just chill for the first 30-45 minutes after the open and not feel like you "need" to be in something. Most of the time alerts that go off right at the open are not worth getting into anyway as that usually indicates a BIG GAP UP in market and at this point, and you would be CHASING at this point. I hate chasing stocks at the open. I do not mind chasing a good trend but chasing near the open is very risky as it is still way too early in the day to tell whether a trend is starting or whether you are sitting on a stock that gapped up, lured you in and now wants to drift lower the entire session.

Wait, relax and keep your composure. I would much rather see traders: WAIT patiently and allow 1-2 stocks to give SOLID entries in the highest quality stocks that are acting and behaving correctly than take on 6-7 average, so-so, mediocre setups.

Remember: LESS IS MORE!

Trade em with composure!

1 comment:

Judy G said...

M.D. and Stewie:

I find that it's better just to bide my time until after 10AM. This is the time that the market/traders take their positions and I think, also, that there are orders being filled that were left from the previous afternoon. Just sit tight and let the trades come to you and don't feel you'll miss anything by not trading all the picks.

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