Sunday, January 10, 2010

Finding Your Niche

I am reading "Enhancing Trader Performance" by Brett Steenbarger.

The first major idea in the book is the idea of finding your niche.  Only once you find a way of trading that is comfortable for you can you consistently make money.

I have found that I am drawn to deep value and using charting to find excellent entry points.  I prefer finding the bottom of the range, when sentiment has gone deeply negative, and then looking for reversal signals (often the 'dragonfly' candle) to begin a position.

At the same time, I find myself excited by those big breakout stocks and watching them burn up for 50% weekly gains... I feel like I'm missing out.  However, this is not my niche.  By waiting for the low points, I often make a lot of money over a longer period of time.

That said, I have entered a position in RNWK on a classic 3 bump pattern.  I can see that if it falls below 3.70 -- I need to exit immediately.  This pattern is a bottom pattern and you can't give it room as a break means many weeks of dead money.   I know the stock is trading at book value but with no positive earnings... it can easily drop 10 - 20% if there's no more buyers.

 Other than that, I am mostly sticking with my various microcaps which performed well last week.

No comments: