Satuki @ Home

Are you a trade-holic? Do you feel excited or high when you place a trade? If your answer is “Yes”, then it is detrimental to your trading. Today was another smooth day for my day trading. I took only one trade. It was one solid run from the beginning. I stop right there if my opening trade is good. There is no need to push my luck. Here is why.

If you are religiously following your trading plan based on probability, you should scale back when you are on a winning streak, and you should be aggressive when you are on a losing streak. This might be totally opposite of anther school of traders. They think people should be bolder when they are on a winning streak and conservative when they are on a losing streak. Although that theory makes sense,it is just not for me. Let me use a simple example to illustrate my strategy. And you decide which one is for yourself

Assuming I could follow my system to the letter, that is I take every signal it generates and I know its probability and my risk/reward ratio, I placed 3 trades and lost all them in a row. Now my system generates another signal, I take it and slightly increase the size of that trade because I know the probability of a successful hit is around the corner. By “aggressive”, I mean that you take every trade you system feeds you and you also slightly increase the size of your trade as long as you do not to exceed your maximum daily/weekly/monthly risk threshold. For example If you reached your daily loss cap(say 1000), you must stop no matter what your system tells you.

Let’s reverse it. Now I am on a winning streak. I placed 3 trades and won all them in a row. Now my system generates another signal, I ignore that signal or slightly reduce the size of that trade because I know the probability of a successful hit has greatly diminished. Therefore, it is not hard to see why I use this strategy.

OK let’s move onto my daily trading analysis. Major indices have been chopping around the previous lows. The bears wanted to crack the support quite a few times. But it has been very trying for them. We are at a very strong support here. The odds of profitable trades are on the bull side. However, it does not mean the strong support can be cracked. Once it is cracked, we could possibly see a quick drop to 7500 and even lower. This only matters to my swing positions which are my core trading. As for day trading, who cares?

FAZ,FAS,TNA and TZA are permentely on my day trading list. Under normal circumstance, I will only day trade these 4 stocks. Today I went long on FAS. And It was a 4+% gainer. I posted my FAS entry in real time on Twitter/StockTwits.

I am closely watching the following stocks for possible swing longs if the bears do not crack the support. RIMM, FSLR, MOS, POT, X, GOOG, AAPL, HES, RIG, NOV, AMG