Basically I am looking for firming prices and rising volume. By buying a strong stock towards the end of the day I am confident about buying a well supported stock. I follow the stocks of interest using intra-day charts and market depth which are available from most on-line broker’s web site.
Many people have challenged me about this strategy because they say I am paying dearly for a stock that has possibly already had a good run. Sometimes it is perceived I pay a premium if I am buying a stock which has already made increases, but later when the stock has made further large gains it is not in reality a premium.
I am happy to pay a premium for the confidence that a stock has a good chance of opening strongly the next day. This does not mean I follow a stock’s rise to a point of insanity. If a stock has run too hard I am happy to let it go. I am resigned to the fact that I cannot be on every winner.
Case in point is BIL called in SharesBulletin Portfolio this Monday. By the time I got round to buying it for one of the funds I manage, the stock had run hard and as of Wednesday it was ahead almost 12% in the three days! Do you chase it or will it pullback?
One of the most difficult aspects of trading for beginners is to buy a stock (or futures contract) that has had a good run. The art is picking those markets that still have significant further upside!
One of the reasons I am more comfortable buying in the afternoon is I have also experienced many times in my early days of trading, buying in the morning only to find the market has come off – I don’t like to lose even 2-3% so afternoon buying works well for me.
What about selling? If I have a view the market might start strongly and then come off then I sell in the morning. But if a market develops momentum during the day as it did Wednesday this week then I might take the opportunity to cull stocks that are just not moving hard enough. As a general practice I would have to say I historically sell in the mornings.
I hope maybe this provides some little insight into how others operate. I welcome your views on your preferences!
Enjoy the ride!
Tom Scollon Editor |