I realized that even though I use patterns to swing trade off of momentum, I'm sort of a scalper. If I can make a decent profit quickly, I just take the money and run to the next setup. I don't hold for more, even though I'm using 3 month charts. Anyone else doing this? SM
Doing what ? Being a Scalper with winners and a Swing Trader with losers ? I knew some of this kind ... But by evolutionary pressure they quickly gone extinct. =P
OK, I'll play along. Essentially, the answer is "yes". And here's why: I only buy into a stock or an ETF based on it's chart and a demonstration of momentum. When I buy, I am prepared to hold for a while until it makes a profit. I am also prepared to wait until I get a sell signal. I wouldn't do this if I didn't think my winners outweigh my losers. If it makes a nice profit quickly, I have a tendency to lock in the profit quickly and then look for another setup elsewhere. Or it might evolve slowly, so I wait for a minimum profit. However, I also have signals that tell me when it's long term trend is changing, so I'll sell. So in effect, yes, there are situations where I'll buy a stock and hold it while it is "going south" until I'm sure it isn't going to turn back around....but if it jumps, I would/will sell it quickly. So in a sense, if you look at only one side of the balance sheet, I am taking my profit quickly and my losses slowly. But sometimes I also take my profit slowly too. So I find my slow profits outweigh my slow losses. And the quick gains are icing on the cake. I very seldom take quick losses because I tend to buy in near support....in the rare instance that happens, it's due to bad news being released right after I buy. Re-reading this is confusing. This might help. Long or intermediate term win $ > Long or intermediate term loss $ (if left alone) Short term win $ >> Short term loss $ (when locking in profits and losses early) What's not to love? SM
Didn't need to re-read. How long are you willing to wait for a bounce signal till you take your loss ? Is it only a matter of time ? Don't you have a Price / Max Risk constraint ? Why don't you do the same thing with profits ? Wait to take them till you see an adverse signal ? All in all ... If you're profitable and stand the test of time then it's fine.
If you can consistently take money out of the markets, legally, over a protracted period of time, you have earned the right to label yourself any kind of trader you choose. Call yourself a turtle momentum scalping wizard or a psychic human algo bot - your call entirely.
I play stocks with good momentum. I try to buy close to resistance, and if resistance is not significantly pierced and momentum continues, then I'll hold forever. And why not, since I start with a healthy uptrend to begin with? My max risk is if I buy in and the stock immediately goes down and crosses my moving average line. So I know to the penny what my risk is and whether it is acceptable. As for why I don't do the same thing with profits....well....picture price action as a small cycle on top of a moving average line. If I buy in low on that small cycle, and then the stock moves to the top of it's range while it also moves up the trend line, then that's a pretty good move. It's like walking up the stairs on an escalator...you're rising fast. I describe it as playing a saw tooth instead of playing the whole saw. The thing is, if I play the saw tooth and it moves up nicely then I sell...I'm happy to make a few percentage points. I have a rule of thumb where I compare the percent gain to the number of days I've held the position. If I find I've averaged more than 1% a day (with a minimum of 2%), then I usually sell.
I'm not sure what you're asking. I like to look at charts of at least 2 months because I can see a decent amount of past history, but I'm still zoomed in enough for my old eyes to see detail.