Sub 10c medium term trading strategy

[fiftyeight]

Setup 8, was the buy on the 21st?

 

[burglar]

... I am open to discussing any opinions, objections and anything else people have in regards to this approach.

You are not dealing with traders nor investors when you buy these stocks.
You are competing with gamblers (or more politely, entrepreneurs and speculators)!

 

[craft]

This is an off topic post...

Love the avatar!

Me too

except: the official traders winter uniform is a t-shirt, trackies and uggies and the summer uniform is singlet, stubbies and thongs - which leaves me wondering whether your avatars are off to a wedding or a funeral

 

[CanOz]

Me too

except: the official traders winter uniform is a t-shirt, trackies and uggies and the summer uniform is singlet, stubbies and thongs - which leaves me wondering whether your avatars are off to a wedding or a funeral

Trying to make a good impression here Craft

Hey, at least I'm just a blue blazer and collar...

 

[pavilion103]

You are not dealing with traders nor investors when you buy these stocks. You are competing with gamblers (or more politely, entrepreneurs and speculators)!

Yes this is a very speculative approach. That's why I suggested a small allocation of capital and a system to be traded as a side account.

It will be interesting to see how this goes. I may have to add some additional criteria to some of these stocks.

 

[pavilion103]

Me too except: the official traders winter uniform is a t-shirt, trackies and uggies and the summer uniform is singlet, stubbies and thongs - which leaves me wondering whether your avatars are off to a wedding or a funeral

I wouldn't have made it to the cover of time magazine in trackies

 

[pavilion103]

Hey Pav, with say setup no.6, have you considered buying support at 2.5, and setting stop a few ticks away? Or are you only interested in buying the breakouts?

Yes certainly a consideration. I can see the enormous upside in getting in near support and having a tight stop. If it takes off the profit would be huge. On the other hand I'd be copping a lot of 1R losses.
Also tighter stop would mean a larger position size using fixed fractional, meaning I can take fewer trades.

The question is do I want my capital in, say, 10 stocks or 3 or 4 (or fewer)?

The idea of the tight stop appeals to me very much, maybe to be used when there is a stronger defined support? I don't know. But for the purpose of this I want to try and get on as many as possible, eliminate the initial risk (BE stop) and then hope for the next SIR (well maybe not exactly).

Having said that, don't be surprised if you do see one of those tight setups soon! Love your thinking.

 

[burglar]

Yes this is a very speculative approach. That's why I suggested a small allocation of capital and a system to be traded as a side account.

It will be interesting to see how this goes. I may have to add some additional criteria to some of these stocks.

Yes! I was suggesting that the "patterns" of trading would be different.

You are swimming with sharks; not grazing with sheeple!

 

[sammy84]

The idea of the tight stop appeals to me very much, maybe to be used when there is a stronger defined support? I don't know. But for the purpose of this I want to try and get on as many as possible, eliminate the initial risk (BE stop) and then hope for the next SIR (well maybe not exactly).

Good thread so far. I have traded a similar system for the last few years. As a side account also.

It has been running hot lately (MKB, RIA, SDL etc) but there can be many months where nothing happens.

My learnings so far with trading small caps-

• Keep a very wide stop (~30%). A lot of manipulation goes on with these stocks and they don't always move as expected.
• Take profits when they're there - if a stock moves >10% in one day I normally take my small profit and move on. I like this system to take a whole a lot of small profits rather than one big one. I think the key with small caps is capitalising on the initial euphoria (often short lived) of the punters, gamblers who seem to like these stocks. One of the places I search for potential set-ups is on hot copper's most talked about stock list. It's those stocks which get the short term traders irrational traders who jump on trends.
• Another reason I like to be out quickly is that too often when price parabolically moves up, a capital raising is around the corner.
• This system is probably always best as a side system. Volume whittles always too quickly with these stocks that I need to accept that there may come a time that there is not enough volume to exit any of my position. Hard to scale such a system.

 

[burglar]

... My learnings so far with trading small caps- ...

Hi sammy,
You say it so much better than me!

 

[pavilion103]

Appreciate the thoughts of people that have been here before!

I'm guessing plenty will be learnt through this exercise. I may come out of it with similar sentiments. We'll see!

 

[burglar]

... Another reason I like to be out quickly is ...

The words Deft and Nimble come to mind.

Deft:
adept
adroit
nimble

Nimble:
agile
deft
lithe
lively

 

[pavilion103]

SETUP

 

[pavilion103]

Current setups (some changes)

3 - 0.040, 0.024

4 - 0.021, 0.013

5 - 0.092, 0.076

6 - 0.036, 0.022

7 - 0.068, 0.057

8 - 0.098, 0.008

9 - 0.028, 0.021


A good number of setups. Hopefully some action soon.

 

[pavilion103]

SETUP






With these entries I use a buy-stop to enter but also put in a limit entry price a few ticks away incase it jumps a bit on open.

- - - Updated - - -

Setup 8, was the buy on the 21st?

These are buy-stop entries so Setup 8 has not yet been triggered.

 

[pavilion103]

Some adjustments to be made to setups.
Don't have the time at the moment.

Will post an overall position update at the end of the week too.

 

[Rider]

Hey Pav and all, interesting thread Pav and thanks for sharing

I am pretty new to trading and just want to know as to why trading in these stocks is considered gambling?

that may be a silly question to more experienced traders but taking Pavs example for instance, he has a pre defined risk in his trades and set an initial stop. He has also recognised a pattern and wants to trade to his advantage.

So Pav and others do you think you can trade these types of stocks and stay on the profitable side of the expectancy curve? or should they stay a play thing, some of these stocks have a lot of volume going through them so someone must be using them.

Rider

 

[burglar]

... just want to know as to why trading in these stocks is considered gambling? ...

pav is just one trader, many others in this zone are not using his sensible approach.
I would suggest that you need to learn a lot to venture here.

It is a high risk/high reward environment.
Even pav will risk only some of his portfolio here.

 

[pavilion103]

I wouldn't recommend it for the new trader.

I've seen people who will put $5000 or $10000 in one of these stocks hoping it will go up, with no plan of exit, because they get starry eyes by the potential for huge gains. The home run.
Things can go wrong very quickly in these.

As said above, a sensible approach is needed with strong risk management. Some of my speculative calls above make it sound so lucrative but these sort of trades are exceptionally rare. You need a lot of patience and discipline in order to put yourself in a position to benefit from them.

They are also less predictable. That's why I devote the majority of my money to the momentum strategy where it is much easier to discern price action and achieve a more predictable return than these ones.

I would only use a small percentage of my money for a strategy like this for the above reasons.

I have no doubt it can work but you'd want a solid plan, mindset and wouldn't want to put all your eggs in this basket.

 

[galumay]

Current setups (some changes)

.....

8 - 0.098, 0.008

.....

A good number of setups. Hopefully some action soon.

Looks like a bit much spread on setup #8!