Yesterday Sam asked the following question ….Sam Says: February 25th, 2009 at 7:20pm: What characteristics make a good intraday trading stock?A good intraday trading stock offers you excellent risk/reward opportunities. It is a stock that you can read is about to trade higher or lower. A good intraday stock gives you good prints. A good intraday stock is one that moves. But the moves are not crazy, scarey, and/or unpredictable.
A good intraday stock is one where you can identify spots where your risk/reward is 1×5. A stock where you downside is 5c and your upside is 25c, or your downside is 20c and your upside is $1. A good intraday stock is one where you surmise that your risk/reward is 1×5 and it actually is. As opposed to your risk/reward actually being 1×1. Sometimes stocks look like they offer an excellent risk/reward. But then the stock trades against you and you cannot get out. And in fact your risk was much larger than you had calculated.
You are only as good as the stocks you trade. If you are the best trader in the world but your stock does not move, then you cannot make money. Trading a stock that doesn’t move is a trading day wasted. So I look for a stock that will move intraday 3-5 points at a minimum.Yesterday I traded WYNN. WYNN traded from 23 to 21, then 21 to 23, then 23 to 21, then 21 to 22.50. WYNN moved about 7 1/2 points intraday. This is the movement we need to make money. This is excellent intraday movement.
Today I traded FLS on the open. FLS moved from 50 to 53, then 53 to 51.50, then 51.5 to 53 before 11AM. FLS moved about 8 points intraday before 11AM.Now I don’t want stocks to just move. We need stocks where we can identify that they are about to move in a certain direction. A stock that moves 50 points intraday may never offer us excellent risk/reward opportunities. Some stocks move too much intraday. When you are wrong the rip is such that it wipes out any gains.
There are some stocks that are easy to read. WYNN and FLS were easy to read the past few days. We could identify the direction it would trade. And I like a stock like this. There are some stocks like GS lately where I struggle to determine the direction of the stock. GS this month is so difficult that if the GS Specialist jumped in a cab and came to my desk at 417 5th Ave., and told me where GS was going, I might still be confused.I guess this is why I have been positive 90 percent of the trading days when I did not trade GS. And why 100 percent of the trading days I have been negative when trading GS. Are you sensing a pattern here?
Lastly we seek a stock that offers good prints. A stock that gives you prints near the bottom. A stock that gives you prints near the top. Some stocks move up and down in 50c clips. But when you bid for the stock near the bottom you aint getting any stock. And when you offer the stock near the top the Specialist will walk away from your prints. If you cannot get the stock at good prices then this impacts your risk/reward. If you cannot get the stock at good prices then you may not be able to execute excellent risk/reward trades. The stock may move up and down without an opportunity to make good trades. And sometimes that is just the way it is.
I hope that answers your question Sam. I appreciate your question. And please keep reading.
Best of luck with your trading!
10 Comments on “From the Mailbag – Part 2”
Thanks alot for the post, it was very informative.
Thanks alot for the post, it was very informative.
Other than the two stocks you mentioned, what are a few others that you like to trade and maybe a few you do not.
Thanks
Other than the two stocks you mentioned, what are a few others that you like to trade and maybe a few you do not.
Thanks
Great informative article. I created this scan that looks for stocks with wide trading ranges: “Stocks w/ WIde Trading Range Sort by Up Most from Open” http://bit.ly/n21o5
Great informative article. I created this scan that looks for stocks with wide trading ranges: “Stocks w/ WIde Trading Range Sort by Up Most from Open” http://bit.ly/n21o5
Its like the indices, some days you can read them other days you cant.
Its like the indices, some days you can read them other days you cant.
Also seems a SIP (stock-in-play) for one trader might not be a SIP for another. Jeff blogged about GS on Feb. 26th as well and although missing an initial entry point on Feb. 24th he traded the rally successfully for remainder of the day. I suppose that’s where personal trading style and self-coaching comes into play for determing your own SIPs. To each their own…
Also seems a SIP (stock-in-play) for one trader might not be a SIP for another. Jeff blogged about GS on Feb. 26th as well and although missing an initial entry point on Feb. 24th he traded the rally successfully for remainder of the day. I suppose that’s where personal trading style and self-coaching comes into play for determing your own SIPs. To each their own…