As of 12/27/2024
Indus: 42,992 -333.59 -0.8%
Trans: 16,031 -73.46 -0.5%
Utils: 987 -4.51 -0.5%
Nasdaq: 19,722 -298.33 -1.5%
S&P 500: 5,971 -66.75 -1.1%
|
YTD
+14.1%
+0.8%
+12.0%
+31.4%
+25.2%
|
 44,200 or 41,750 by 01/01/202516,700 or 15,500 by 01/15/20251,050 or 975 by 01/01/202520,500 or 19,300 by 01/01/20256,100 or 5,775 by 01/01/2025 |
As of 12/27/2024
Indus: 42,992 -333.59 -0.8%
Trans: 16,031 -73.46 -0.5%
Utils: 987 -4.51 -0.5%
Nasdaq: 19,722 -298.33 -1.5%
S&P 500: 5,971 -66.75 -1.1%
|
YTD
+14.1%
+0.8%
+12.0%
+31.4%
+25.2%
| |
|
44,200 or 41,750 by 01/01/202516,700 or 15,500 by 01/15/20251,050 or 975 by 01/01/202520,500 or 19,300 by 01/01/20256,100 or 5,775 by 01/01/2025 | ||
This article discusses overtrading. How do you figure out if you are overtrading and what should you do to cure it? Let's take a look.
In 2007, I came to the conclusion that the type of trading I was doing wasn't working as well as other techniques, so I decided to change. That was strange since I made over 22% in 2006, handily beating the closest average, the Dow industrials which had a gain of 16.3%. I sold the stock (Michaels Stores was taken private) that had powered my results in prior years, so I started looking for replacements.
The trade in Pioneer Drilling (PDC) shows the type of behavior I was seeing in some of my trades.
I bought the stock as it broke out upward from the congestion zone, but price collapsed. Soon, it was clear that it had reversed and broken out downward instead, so I sold the stock, taking a loss.
I should have recognized the potential for price to move lower because it often takes the shape of a measured move down chart pattern. I show that pattern beginning at A, dropping to B, correcting to C, and finishing at D. That's hindsight, of course, and hindsight is always 20-20.
As it happens from time to time, I sold just days before price resumed its upward move. If I held on, I could have doubled my money, as the chart shows. In other words, this trade tells me that a longer hold time would have been rewarding.
As part of your year-end review, look at your entry and exit timing. If you find you are entering early or late, then make changes. If you are exiting early (most likely) or late, then make changes.
For me, the answer was to focus on fundamentals, a return to the way I started my investing career. By stopping trading and focusing on timing the exit, coupled with a market that has rewarded holding, my results improved. I expect to double or triple my money within 2 to 3 years, mostly by holding what I own now. I will trade from time to time, especially when opportunities present themselves (like an inverted dead-cat bounce), but I can make more money by ignoring the weekly ups and downs and not get shaken out of trades like PDC illustrated here.
With your trades, ask yourself if you held longer, would you have made more money? The answer is probably yes. One solution is to use a higher time scale to exit. If you're a day trader on the 1-minute scale, exit using the 5-minute scale. If you're a position trader using the daily charts, then switch to the weekly scale on the exit.
-- Thomas Bulkowski
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