Daytraders After Market Lounge 18th Oct, page-35

Hi folks (and Dooley),

Well, the last month has been an interesting experience for me. No completed trades - just holding and waiting for news on the tiddlers I own. This is good practice for later on, because this is the way I intend to trade once I have my finances sorted out and can assemble something like a proper portfolio. I am down in about half of the ones I'm holding, some by about 45-50%, awaiting news. Possibly a mistake, but I'm using this time now, when I only have a tiny amount to invest, to do some serious learning. An example is ZMI/ZMIO - should have sold at the first spike, but I bought it for the results so thought I'd hold and wait. Yep, a genius in hindsight. And what about my stop loss - err, yes, good question.

Here's another copy and paste from the Marcus Today newsletter. Hope I'm not sounding like a spruiker, but I like his thoughts. He started doing some short-term trades a few months ago. Here's how he's gone and his reasoning. You will notice that these are not the penny-dreadfuls most of us buy. Might be something in here which is useful to some of you - I hope so

"PREVIOUS TRADES
This is a table of trades since this section opened in mid-June.





As you will notice, and as you will read in texts about trading equities, the “edge” we are exploiting is not just a cliché, but a reality that we are cutting losses and letting profits run by rolling stock losses up manually on a daily basis, quite an intensive process. Luckily we do it for you. If you do this on a disciplined and regular basis as we are here you will find the experience very similar to what the table shows you, we have a lot of small profits and a lot of small losses, hopefully the small profits outweigh the losses but not necessarily and by letting our profits run we have the occasional big win which makes the whole process worthwhile.
THE PROCESS

• We manually raise stop losses as the prices rise which allows us to make big gains but only small losses.
• By using rolling stock losses, the moment they are above the purchase price they becomestop profits.
• We never debate holding if a stop loss has been hit - this is the Achilles heel of the majority of traders. Either a lack of stop losses (that become stop profits) or debating them when they hit. 9/10 times if a share price has fallen into a stop loss it is likely to continue to fall.

You will also notice in the table that we get a good run of gains and periodically a run of losses. It is a function of whether the market was going up or down during that period. This experience makes it clear that you need to fire up your trading when the market is with you and chop it back when it is going down.
When the market turns from uptrend to downtrend (fairly easily detectable on the charts) and starts going down I also tend to tighten up stop losses, especially on profitable trades, rather than sit back and wait for the market to fall and the profit to be lost before selling. In other words if we anticipate the market turning and falling we tighten up and cutout rather than ride the slide.
So whilst the market is having a bit of a short-term slide, as it is now, the odds move against us. The reaction is to tighten up stop losses so we lock in profits and minimise losses and pare back our activity. It is pretty cute when the market is going down to think you can regularly identify the stocks going up, can be done but when the odds narrow the best thing to do is accept it rather than keep smashing along opening trades.
So we’ll let the market take us out of our current trades as it has been doing for the last few days. When that process is done the game will be staying awake for when the market turns up again. We will be watching for that as well as any opportunity in the meantime to pick the heroes out of the ashes."

All the best for tomorrow.