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Wednesday, September 06, 2006

Viewer Mail - consistency

Jim sent the following question via email:

"Several trading blogs (for example - Ugly's) have been talking about how tough trading was in August. Certainly there are months or periods when the overall volatility in the stock market declines and there may be fewer opportunities. I don't recall seeing you post on the topic of trading consistency month-to-month. I'm not even sure if you keep such records or statistics.

With the selectivity of your entries (for higher win rates), do you find periods or months where the number of opportunities is greatly reduced, or where the follow thru after entry is limited? For example, did you experience this in August? and if so, do you do anything differently during these periods (like take more time away from the market, etc)?"

I never see a reduction of opportunities. As I have said before, I look at probably 50-100 charts every day after the close - and almost every day without fail I find more set-ups I missed than I actually traded. This does not frustrate me, though - it gives me a lot of confidence that my "trading style" works. The day I look at 100 charts after the close and don't find set-ups I missed will be the day I start worrying!

But - to your other point - I do see a lack of follow-through at times. It "comes and goes", and that is why I preach taking fewer high quality set-ups so you can monitor your positions. When you can "properly" monitor your positions, you keep winners from turning into losers, and you can see obvious reversals or problem areas that will cause you to close your position with a profit. Even though it is a smaller profit (if trades are not hitting the targets) it is a profit nonetheless.

(another way to deal with the lack of follow-through is to focus on 30-minute charts)

The fact that I primarily trade "gappers" means I am trading stocks that are moving because of some event - so that usually keeps me in stocks with the best potential. I don't pay much attention to the overall market or even what it is doing intra-day; I could be in a short when the market is rallying, or vice-versa.

My profits are relatively smooth month-to-month. In fact, I think I limit myself subconsciously because my monthly figures ARE consistent, and while I have a few months where I blow out the average, I should have many months where I do so. That is something I am trying to address now. After all, the only thing that really limits us is ourselves!



Trader-X said...

posted by Tom C:

Great post X!

wincity said...

I agree with you that there're good opportunities every day. I trade many different set-ups, one of them gappers . That's why most days your selection of stocks are also on my watch list. I don't understand why sometimes people say the market is boring. Even yesterday, 9/8, a slow Friday, there're good trades at least on VOL and EFX.