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Confirmation

post #1 of 16
Thread Starter 

I've been thinking about my strategies lately because I've had a large percentage of my trades go in the tank. It took me awhile to realize what I was doing wrong. I haven't been waiting for confirmation. If you don't wait for confirmation you may as well toss a coin. I think it's almost impossible to figure out how these markets are going to react on a given day.

 

When I say confirmation I mean that you should watch the chart for awhile to make sure it's going in the direction you expected. You're going to lose some money and if it reacts quickly you may miss the trade but it will improve your win/loss ratio. The name of the game is to make more than you lose. Just a thought and maybe this will help someone other than myself.

post #2 of 16
Quote:
Originally Posted by BobK View Post

I've been thinking about my strategies lately because I've had a large percentage of my trades go in the tank. It took me awhile to realize what I was doing wrong. I haven't been waiting for confirmation. If you don't wait for confirmation you may as well toss a coin. I think it's almost impossible to figure out how these markets are going to react on a given day.

 

When I say confirmation I mean that you should watch the chart for awhile to make sure it's going in the direction you expected. You're going to lose some money and if it reacts quickly you may miss the trade but it will improve your win/loss ratio. The name of the game is to make more than you lose. Just a thought and maybe this will help someone other than myself.



Remember, there will always be a trade off.  By waiting for "confirmation" you may increase your win/loss ratio but you'll decrease your gain potential.  The key is finding the right mix for your strategy and comfort level. 

post #3 of 16
Thread Starter 
Quote:
Originally Posted by Crazed98 View Post



Remember, there will always be a trade off.  By waiting for "confirmation" you may increase your win/loss ratio but you'll decrease your gain potential.  The key is finding the right mix for your strategy and comfort level. 


i agree but you'll also decrease your loss potential. wink.gif

 

post #4 of 16
Quote:
Originally Posted by BobK View Post


i agree but you'll also decrease your loss potential. wink.gif

 



Maybe I'm not understanding you correctly.  Waiting until a move is confirmed instead of anticipating it increases your odds of being on the right side of the trade while limiting your gains because you had to wait until the move has already started.  Potential of loss is still there if not greater because instead of getting out right after the move is not confirmed you are now waiting until the confirmation is proved false.  This of course is all dependent on your strategy but, simply put less risk = less reward.

post #5 of 16
Thread Starter 
Quote:
Originally Posted by Crazed98 View Post

Maybe I'm not understanding you correctly.  Waiting until a move is confirmed instead of anticipating it increases your odds of being on the right side of the trade while limiting your gains because you had to wait until the move has already started.  

 

Yes, that's what I had posted.

 

Potential of loss is still there if not greater because instead of getting out right after the move is not confirmed you are now waiting until the confirmation is proved false.

 

No, because I am not in it if what I expect to see is not confirmed. If I am in it and it reverses then I'm getting out.

 

 

This of course is all dependent on your strategy but, simply put less risk = less reward.

 

 

Yes, that's what I had posted.  Greed will absolutely break you.



 

 

post #6 of 16

Lol, I guess I'm still not getting it then.

post #7 of 16
Thread Starter 
Quote:
Originally Posted by Crazed98 View Post

Lol, I guess I'm still not getting it then.



Example: MU has not been performing well and their earnings report was bad. I shorted at the open @ 5.70 and it shot up to 6.65. Had I waited for confirmation before trading I could have shorted @ 6.65. You have been posting almost exactly what I said in the first post. If this explanation doesn't clear things up call me. laughing.gif

post #8 of 16
wow...thought i check in and see some comfirmation debate as to what one considers confirmation...instead i just got a headache...seeing two guys debating and disagreeing but saying the same stuff ???laughing.gif idk guess im missing something...

maybe the part thats confusing to me and somewhat contradictory is this statement which seems to be a little ???
Quote:
Potential of loss is still there if not greater because instead of getting out right after the move is not confirmed you are now waiting until the confirmation is proved false. This of course is all dependent on your strategy but, simply put less risk = less reward.
post #9 of 16
Quote:
Potential of loss is still there if not greater because instead of getting out right after the move is not confirmed you are now waiting until the confirmation is proved false
.

Quote:
No, because I am not in it if what I expect to see is not confirmed. If I am in it and it reverses then I'm getting out.



think this is where you guys are just missing each other maybe...weird i see and agree with everything each has said...so only conclusion is both are saying same thing just in a diff way and arent quite getting how the other is saying it ...anyway...sorry to but in ....excedrin time popcorn.gif
post #10 of 16
Thread Starter 

All input is appreciated. Another example is ZNGA IPO. I put my order in at market before it went publick. I got it at 11.00 and within 30 minutes it dropped to 9.00. Usually I do well with IPO's. DNKD and LNKD.

 

Potential of loss can be greater is the only difference I see and I disagree with that statement..

post #11 of 16


 

Quote:
Originally Posted by BobK View Post



Example: MU has not been performing well and their earnings report was bad. I shorted at the open @ 5.70 and it shot up to 6.65. Had I waited for confirmation before trading I could have shorted @ 6.65. You have been posting almost exactly what I said in the first post. If this explanation doesn't clear things up call me. laughing.gif


 

Maybe I'm just looking at it differently than you.  In your situation what type of confirmation would you have been looking for?  I assume the reason you got in before any confirmation is because you thought the bad earnings would drive the stock down.  By getting in at that point you are maximizing your gain potential because if you are right you will have gotten in at the beginning of the move.  If you  had waited for confirmation (my opinion of confirmation being a strong downward move or broken support) you would have seen there was no confirmation avoiding the trade and increasing your win loss ratio.  Not that shorting an overbought stock is a bad trade but, I don't see what confirmation you would of had when the stock moved in the opposite direction on strong volume.  Shorting at 6.55 would be trading without confirmation of the downward move.

 

 

The example I think of is something simple like buying a bounce off support.  You can either buy before the bounce getting in right at support or buy after the bounce is confirmed at a higher price.  

 

By buying at support you get in at the very bottom and increase your gain potential.  If support is broken you sell right away limiting any major loss.  You may have more losses than wins trading this way but, your losses will be small and your gains big.  Done right your few large gains will out weight the several small losses.

 

Now if you were to wait until the move is confirmed you will have gotten at a price higher than support so right off the bat your gain potential is less but, since the move was confirmed there is a better chance of you being on the right side of the trade.  Issue is if the stock reverses when will you get out?  I would think you would wait until the bounce completely fails (support is broken) which will leave you with a bigger loss than the trade above.  If you decide to cut your losses sooner because the move isn't taking form then like the trade above you will end up with several small losses and a lower win/loss ratio and be right back at square one. 

 

I don't know if that clears it up a little.

 

post #12 of 16
Thread Starter 
Quote:
Originally Posted by kevin1612 View Post

 ....excedrin time popcorn.gif


You got that right.

 

post #13 of 16
Quote:
Originally Posted by BobK View Post

All input is appreciated. Another example is ZNGA IPO. I put my order in at market before it went publick. I got it at 11.00 and within 30 minutes it dropped to 9.00. Usually I do well with IPO's. DNKD and LNKD.

 

Potential of loss can be greater is the only difference I see and I disagree with that statement..


 

Can you elaborate what kind of confirmation you'd be using on the day of an IPO?  My confirmations are always technical-related in nature (attempts to break previous support/resistance areas over the backdraft on underlying market internals (on a directional trade).  Price action on IPOs are so erratic that you can often have no real indication of where demand/supply actually is; the ZNGA IPO for example ended up finding buyers at the $9 level on the nose, yet that's all hindsight if you were to trying to trade ZNGA that day (we could have easily saturated supply on a break of 9 down to 8.xx to punish a potential short-lived bounce); so essentially what kind of confirmation would you have been looking for here?

post #14 of 16
Thread Starter 
Quote:
Originally Posted by jbrand1 View Post


 

Can you elaborate what kind of confirmation you'd be using on the day of an IPO?  My confirmations are always technical-related in nature (attempts to break previous support/resistance areas over the backdraft on underlying market internals (on a directional trade).  Price action on IPOs are so erratic that you can often have no real indication of where demand/supply actually is; the ZNGA IPO for example ended up finding buyers at the $9 level on the nose, yet that's all hindsight if you were to trying to trade ZNGA that day (we could have easily saturated supply on a break of 9 down to 8.xx to punish a potential short-lived bounce); so essentially what kind of confirmation would you have been looking for here?




On future IPO's I will wait and see what direction it goes. I anticipated the trend as going upwards on ZNGA and you know the rest of the story. It moved so quickly downward I would not have gotten into that trade. If it moved up a few bucks as I anticipated I would have caught it and put a stop on it and made some money. Just should have waited a few minutes to see.

 

Stocks I use MACD, RSI, VWAP and volume. My problem as stated is that I'm jumping the gun and not allowing the trend to lead me.

 

Confirmation is a broad term and everyone has their own strategies so that's why I didn't want to get into that.


Edited by Bob Korreck - 1/2/12 at 12:55pm
post #15 of 16
Quote:
Originally Posted by BobK View Post




On future IPO's I will wait and see what direction it goes. I anticipated the trend as going upwards on ZNGA and you know the rest of the story. It moved so quickly downward I would not have gotten into that trade. If it moved up a few bucks as I anticipated I would have caught it and put a stop on it and made some money. Just should have waited a few minutes to see.

 

Stocks I use MACD, RSI, VWAP and volume. My problem as stated is that I'm jumping the gun and not allowing the trend to lead me.

 

Confirmation is a broad term and everyone has their own strategies so that's why I didn't want to get into that.



I hear you Bob, I'm just not sure how one would get a significant equity advantage on an IPO offering; MACD/RSI would be useless and VWAP would be skewed short term for the usual mass-exchange of shares in the first 15-30mins of trading (which is often not indicative of true price/demand).  If you have a system that works, that's great.  I just never found price and volume to be accurate gauges of price action on day 1 due to the volatility at any given moment.

post #16 of 16
Thread Starter 
Quote:
Originally Posted by jbrand1 View Post



I hear you Bob, I'm just not sure how one would get a significant equity advantage on an IPO offering; MACD/RSI would be useless and VWAP would be skewed short term for the usual mass-exchange of shares in the first 15-30mins of trading (which is often not indicative of true price/demand).  If you have a system that works, that's great.  I just never found price and volume to be accurate gauges of price action on day 1 due to the volatility at any given moment.

 

No, not what I said. Or didn't mean to. IPO's chart only. Up or down. Very basic and simple. My other indicators are for established stock.
 

 

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