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Author: just1trader Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2705  
Subject: Re: Trading Thin Markets? Date: 5/14/2013 5:57 PM
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The way I trade is to look for dollar amounts and am not looking for percentages,

Quill,

For me, the two are linked. If I want to make $40 bucks per day, and if I'm trading a round lot of a $5 stock, that stock has to make an 8% move for me to make my $0.40 per share. I can't count on finding those kinds of moves every day, even though moves of 3x, 4x that happen every single day somewhere in the market, as the daily list of percentage gainers shows. To position myself to capture those moves requires better scanning skills than I have. If position-size is increased, then the size of move that a $5 stock needs to make gets decreased. But I hate trading large positions. It's a totally irrational fear. But I'm not going to fight it. I don't like trading large positions.

Yeah, I'm fully aware that trading one futures contract on an equity index is the dollar equivalent of trading thousands of shares of the underlying. But it isn't the psychological equivalent. One futures contract is just one contract. The ticks are fixed steps. Gain are taxed 40/60, short-term/long-term. My commish is $4/per round trip, and just one tick on nearly anything more than covers that. So it's very easy for me to control my risks and to trade for nickles and dimes.

It's been nearly nine years since I traded futures, because I was so deeply involved with learning the bond game. But I've got that wired. I'm as good at that as I'm going to get, and not much is cheap enough to merit much attention. So my time is free to see what I can do trading futures. As for the charting stuff with stocks, I've made enough progress that can go on the back burner until my daughter comes off the trail in the Fall.

When I used to trade futures, I used a 4-monitor setup. But I think I can get away with my present three, which makes a more convenient desktop arrangement. Trading futures wasn't quite the path I had envisioned when I said I wanted to move from investing to trading. I was thinking more along the lines of some stocks, ETFs and end-of-day charts. But if the simpler thing is futures and short-time frames, that's what I'll do.

This is the tradeoff I see. Success in investing depends on analysis. Success in trading depends on performance. I can be a good analyst, but I'm not a sustained one. I burrow into a problem, but then I lose interest. Bonds, for me, were a good balance between analysis and performance. There were times when I executed accurately and unerringly in as little as 2 minutes of due-diligence, though 5 to 10 minutes was more the norm. No bond investor acts that fast. But if you know your market really, really well, and if you've set up your vetting procedure properly, and if you've practiced, practiced, practiced, then good decisions can be made quickly before the quote changes and the opportunity is lost.

I don't mind working under that kind of pressure. I don't want to do it all morning or all day. But an hour or two is about right. You get up. You do your job, and then the day of the day is your own. If I were truly trying to support myself from trading alone, I'd have to work full-time. But my needs are so modest, I can live my on my Social Security alone, or my pension alone, or what I make from bonds several times over. Supporting myself isn't a problem. Acquiring the skills needed to hedge assets when the market crashes is a problem, and that might be best solved by doing a futures apprenticeship.

Charlie
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