I am trying to learn the stock market by paper trading and had some questions about the way the market opened up the past two days (June 2nd and 3rd) On both days, every single stock I was holding crashed and hit my stop order within minutes. Looking at a sector map, it looks like this would have happened to just about every stock unless it was in the utilities sector, and yesterday the same thing except it was the healthcare sector. Every stock I had bought didn't seem to violate any guidelines. Analyst ratings all looked good. Price action looked good. No negative news. I would really like to avoid this happening with real money. Every time I make a bad trade I like to identify the problem and how to avoid it. But I can't seem to come up with anything. So what I am trying to figure out is - 1. is this a common occurrence? 2. what causes one sector to do so well while all others crash? 3. can this be predicted beforehand?
@frobot 1. is this a common occurrence? - yes 2. what causes one sector to do so well while all others crash? - depends on the sector, and wall street LOVES to run stops so they can buy back cheaper 3. can this be predicted beforehand? - not that I know of.
One theory I had was that people can somehow know in advance that, for example, the health care sector would do very well for the day, then they get rid of what they are holding to invest in healthcare, causing most other areas to crash out. My other idea that I really didn't want to be true was that there was a way for people to manipulate things to go down to hit stop orders, then sell once it goes back to where it was. If it's the first one, there should be a way to predict it. If it's the 2nd one, well that's just a shame.
Taking a different view, be careful about using stop orders. Instead of having stop orders in, you can have a stop price in your head and an alert if that gets hit. Then watch the action, and see if it keeps pushing down hard or maybe it's finding support. It's mentally hard to not panic, but watch how the rest of the day plays out. Yesterday and the 1st, the market got bought back up after selling off. Like Maximus says on these boards, you don't need to be the first one out of the foxhole. Watch how your stock reacts to pressure.
Agreed, to me alerts are better if you pay attention to them and are willing to get out without emotion if you see the trade is going against you. One other question I might ask though is what are you using for a guide to set your stops? Maybe it is too tight.
I try to set them underneath whatever I find that looks like it would be a support. The thing about the past two days openings though, is that it shot down so much that just about any reasonable stop would have been hit.
The alerts are better if you can pay attention to them and act on them when needed by selling for a loss. You don't mention how much room you give them under support though. Average risk should set stop/alert and about 3% under support so for example lets say you buy at 12 and see support at 10 then a stop/alert should be about 9.70 for a risk to 2.30 per share. More open to risk set 5% below support at 9.50 for risk of 2.50 per share. Any method is right as long as it works for you and you establish a rule and follow it. And just for some perspective, it is not unusual for 60 percent of trades to stop out and 40 percent to be winners. It's the ones that manage those losses to keep them minimul and learns to let the winners run that make the best returns over time. And trust me you won't find many boasting about the 60 percent and only tell you about the winners but those losses are there even if we don't hear much about them.
It just keeps happening. Tremendous losses this morning, and I was even holding WBA (the only stock that did well on the entire S&P 500) I have realized that my time frame just won't work with this kind of market. I wanted to be a day trader but don't quite meet the $25k requirement, so I tried the closest thing I could think of - buy today, sell tomorrow. I think I'd have to be looking for trades that last at least a couple days to make profits more consistent, but I'm no good at long term prediction, only short term. So I'm going to look into futures.
Do a google search for swing trade patterns and see if that method might suit you. You use things like MACD for momentum signals and RSI or stochastics for sentiment combined with several different types of candle patterns. Swing trading is usually designed to be in and out of a trade within the first 10 days or before. You learn how to set a target price and get out when that is hit and also set a stop at the point you know it is going against you and get out at that point. Not a bad strategy just takes a little learning the setup and getting into that type of rhythm.
you don't need $25k to daytrade...you just need cleared funds in your account to continue to trade. I think you need around $5500 to trade futures...I might be wrong though
You have to have $25k in your account to not be subject to the ridiculous pattern day trader rule. The only ways around this are using a cash account or trading forex or futures, as far as I know.
I never had 25K in my account, and day traded as much as I wanted, as long as the cash was settled. No problems.
depends on the broker, fidelity i know will flag your account and restrict your day trading margin to 0 if you have less than 25k in your account. EDIT: oh yea, if you had enough settled cash to buy the stock and cover it when you sell it, then yea you could day trade without the use of margin. as for getting stopped out of a trade, i agree with everyone else, dont use hard stops, set a mental stop in your head, then you should be looking at the chart and also looking at ADD and TICK readings to see what the market internals are doing.
The only time I got into trouble was when I : Bought Sold Then bought the same stock again all in the same day.
yes I had above that + margin 1:4 ... but a while back (couple years?) I took a relaxing time away from trading and PC (I do that from time to time) therefore I left just over $10k on the account (I don't like seen money doing nothing) but I did few occasional trades wow your rules are so complicated!!!! this is what I used to get and eventually got the 90 days restriction!!!!! (twice) strange because from here I can open an account with anything from €500 to €1000 and day trade how many as I like.....unfortunately the commissions are too high btw please see this http://stockaholics.net/threads/suretrader-broker-dealer.1296/ SureTrader is an Online Broker that allows you to Day Trade freely with 6:1 Leverage andNo Pattern Day Trading Rules for your account.
>>> Tremendous losses this morning How do you know when to start putting money on the market? IMO simple>>>>When a system has proven itself<<<< your 2%SL is not meant to be hit! It is there to protect you from huge price moves. You should know well before your stop is hit if you are in a bad trade. - all those before me they all give you a good advice as you can see there is some little different between each other....rightly so now for what is worth I will give you mine, try at least, even more different. I am more as a scalper - day trader so my point of view/prospective is oriented on that ... you >>>>I have realized that my time frame just won't work with this kind of market. I wanted to be a day trader If you are able to follow your trading plan-strategy that work, you are a successful trader, end of story. if you consistently follow your rules psychologically you're ready the money will flow. One of the hardest things to do when it comes to day trading is consistently following your rules day in and day out. Day trading is about having discipline. If you are able to consistently demonstrate self-restraint, it's only a matter of time before the $$$ are coming in Paper trade before you put any of your capital on the line. work out a strategy - plan that work for you why losing money while you learn? expensive way to learn study... work... improve it until it work and start getting the $$$ even paper trade there is many way to do it I suggest to work out a solid one, it like building a house... if the foundations, are weak by the time it get the roof on it disintegrate/crumble that is what your capital will do "collapse" DO NOT: Trade When You’re Emotional (psychology to me is the most important tool.... don't let your mind control you but you control the mind The right choice being following the system, not making money. A lot of people make money with a no plan and then think they have some special talent… of course they won't last long.) When I was either excited or scared. both fear and greed will destroy you managing a trade Money Management is considered the most important aspect when day trading. If you do not implement a money management technique when trading, you will inevitably lose your money. those are just few thoughts as a base... most likely you already know them but do you really adhere to them? improve your loses and the winners will follow .. I haven't discovered the hot water or have the Holly Grail but I hardly lose because I prefer getting out straight away rather then holding a loser ....at the same time I jump in when it already move so those few ticks will safeguard my capital in case it turn against me many might not agree with my system but it work for me At the end of the day, you determine what it means to be a successful day trader, no one else. The minute you realize that is the answer, the expectations you set for yourself when trading will become more relaxed as these are tailored to you and your trading style Why Most Traders Lose Money – Only Individuals Can Beat the Market, Not the Crowd . (can't remember who said that ....but is in my bible....and agree) btw I am neither a pro nor a specialist but just someone that know how to make few centsss
