Which Way To Trade
Q: Under my system, I add money to the stocks in my portfolio when the closing price climbs to the next decision point. I have been accomplishing this by trying to strike an order as close to the bell as possible. If I fail, then I just place a market order for when the market opens. Normally, this means that the price is up a bit more than I anticipated.
A:
I would switch to after hours and add stocks instead of money to your
portfolio. However, I would wait until the stock is at least 2.7% past
the decision point when trading after hours. Also keep in mind that the
bell is then at 8PM (if you are trading on the Datek Island) but it will
not be televised on CNBC so you have to watch your clo
hours bells.
Lastly, place your market orders at the close rather than at the open.
This way the price is usually down less than you would have anticipated
rather than up.
On the other hand, if you are making out now, don't switch totally or do
both but weight your strategy accordingly.
I would suggest you don't trade by time of day (or after hours) and use limit
orders rather than market orders. You know the stock and its average trading
range. As the price approaches your decision point place a limit order below
the ask (early in the trading day), but well within its normal range; you'll get
more bang for your buck.
But if you are trading stocks where the range times new shares/2 will only make
a difference of say <= $100, I guess you should stick with your current method.
If you look at interday price charts for awhile and listen to stories of market
order fills you may become more inclined to use limit orders (and remember your
limit can be above, even well above, the asking price if you so desire). To me
a market buy is defined as: I just gotta have this stock right away and I don't
give a hoot what I'm going to get charged for it.
Just about all of my buying is at limits below the asking price (and selling is
at limits above the bid price.)