Sunday, March 27, 2011

Managing Risk like a professional

Gil Morales, a practioner of CAN SLIM trading strategy , whose personal account return was
10,904.25% between January 1st, 1998 to December 31st, 2005, has a simple policy for managing risk:

"I have very few eggs in my basket, first of all, and I watch them very carefully! I use a standard stop-loss of 6-7% on any initial position, and once I am up 20% or more on a stock, I never allow my average cost to get to a point where the stock is not trading at least 20% above that average cost. If the stock starts coming in, I trim any portion of the position I purchased at higher prices to bring my average cost down and bring the position back in line with respect to my average cost. I use a LIFO method of accounting to keep track of my cost basis."

Full Interview:

Wednesday, March 16, 2011


If you're daytrading, I'm sure you've wondered if there are particular times you should avoid placing trades. You bet there is !!! Toni Turner gives us a dissection of the market timings and their implications during the trading day.

9:30 AM : Equities market open

9:45 AM to 10:10 AM : First reversal period. At 10:10 AM , give or take a few minutes, strong stocks that have pulled back slightly on a bulish day will again turn up. Bearish stocks that went up slightly, start trending down again.

11:20 AM: Begining of lunchtime lethargy - instituitional traders leave their desk for lunch - stocks tend to fall
off - active traders lock in profit by 11:30

1:30 PM : Lunchtime lethargy begins to clear - some stocks start to edge up for afternoon session.

2:30 PM : Stocks break out (or down) in a more definitive manner

3:00 PM : Treasury bonds stop trading; market breathes a sigh of relief, possible shift in direction

3:20 PM : Active traders begin to close out positions of the day

3:30 PM: Mild reversals possible

3:55 PM: Additional reversals possible as more positions closed

4:00 PM: Equities market closes

This of course comes with the standard disclaimers:
a. Trust but Verify
b. This always works , except when it doesn't. ;)

Saturday, March 12, 2011

Trade Like An O'Neil Disciple - Part I

To be perfectly honest, I've always been a believer of stock Fundamentals and kind of felt little uncomfortable trading on pure Technicals - I'm always afraid that I'll get into a stock that skyrockets on public Euphoria and then once people realize it has weak fundamentals, decides to try bungee jumping.

Having read Darvas's work - which was obviously Techno-Fundamental in nature, but with lack-lusture guidance in terms of implementation - I was looking for a knowledge source that'll help me replicate Darvas's style of trading/investing. Finally after a lot of research, William O'Neil seemed to be a great candidate. I just found a copy of Trade Like An O'Neil Disciple in Safari Books and started reading it.

Here's the first lesson:

a key but obvious point that ensures that you will not fall in love with your stock and hold it past its prime. Buy based on both fundamentals and technicals, but sell purely on technicals. Technical action should always be the final judge when selling a stock.