Thursday, July 27, 2006


Baseball and NTGR

Down 0.2 percent today. Learning to trade well is a lot like learning to bat well in baseball. To bat well, you have to practise a lot and you have to learn from your mistakes. You also need to know when to swing and when to hold back. Trading is the same. I don't really believe in mechanical trading systems because they overlook the important element of intuition. And I believe that intuition, gained from years of practise and introspection, is what makes a good trader great.

Because I have a full time job (which I enjoy very much), I don't have much time to follow the stock market during the course of the day. But that doesn't mean I can't continue to practise. A few weeks ago I started doing the following exercise: after the market closed, I would look at the NASDAQ most active page to see what stocks were either moving up or down in afterhours trading. I would then focus in on one or two stocks, and try to predict where these stocks would open the following morning. I find this exercise useful in honing my predictive powers. My predictions are often wrong, but of course the nice thing about trading is that you can still make lots of money even if you are wrong 40 percent of the time. Today I decided to put some money on the line. I bought 500 shares of NTGR at $19.24. My not-so-expert opinion is that the stock will open between $19.50 and $20. Let's see if I'm right!

NTGR may open with an abnormal gap tomorrow morning -- I think they reported this evening. So tomorrow morning will not be typical for it.
Well, yes, that's the point. I bought it in afterhours a dollar above the close.
Are you tracking the win rate of the overnight predictions? It would be interesting to see what the curve looks like over time. I'd be particularly curious about whether anyone can have a gradual increase in win rate, or if it's always occasional leaps to new plateaus. I've always had the latter in my daytime trading.

I may have to try this overnight price target exercise. It sounds fun!
cnbc champ thomas ko just pumped pxpl this morning, it may provide an exit
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