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Trading Lessons: Are You a Swing Trader or a Day Trader?


No matter what, chasers are never winners.

Minyan Christian writes:
"I've been having the problem of getting stopped out in the first hour of almost everyday before the market reverses my way. It seems whenever I try to set a lower stop, I get punished for doing that, too. I've considered completely removing my stops until 10:30 Do you view this as a viable approach?

For example, I bought on Monday the Proshares Ultra Long Financials (UYG) shortly before the close at 5.52. My stop was first at 5.48 on Tuesday morning. I raised it to 5.59 (which was $0.02 below the intraday low) when the market started going sideways after the first hour yesterday. When UYG opened at 5.60 this morning, I immediately moved my stop to 5.57 to give me a little more breathing room. I was stopped out at 5.56 a few minutes later, and about 45 minutes later, UYG traded at 5.70.

I also have a real hard time not chasing the market when I get stopped out and then see the market thrusting higher above my stops a few minutes later. As a result, I'm consummated by mixed feelings of greed, guilt for feeling too greedy, and outright stupidity."
I see quite a few problems here. One is in the approach, the other is in the trade management.

First question I have is, why did you enter UYG at the close on the August 24? I see that it had sold off quite a bit into the bell, which makes me think you were thinking the sell-off wasn't appropriate and you wanted to catch a bottom. Was this the case or was there a technical rationale behind your entry?

I see that on August 25, the UYG gapped, which gave this strategy momentum -- very dangerous in my opinion, as it seems like you were guessing. If you're going to focus on intra-day charts, there can be no guessing of fundamental/macro/economic rationale behind your trades. Thirty-minute or 60-minute charts could care less about economics or your broader perspective.
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