Why you might consider trading outside of normal trading hours

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Your data feed might only include what we call normal trading hours or “outcry only.”

For some of you, it might make sense to analyze what happens in pre-market and after-market activity.

You may be able to define a small edge to either improve your entries or exits.

For your exits, you might be able to effect a trade in the pre- or after-market to improve your price and limit losses or to better protect unrealized gains.

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How to run your screens and be mindful of survivorship bias

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Most system traders can screen for tickers by price, volume, and volatility.

You can also add some overlays if you want and test those parameters also.

Here are a few thoughts on running screens.

Be mindful to find the data on the securities that don’t trade anymore and add that data into your overall data to screen.

You may have to purchase it separately.

Names that are delisted are not typically included in what you might be paying for now as part of your data feed.

Else, you’ll only be looking at survivors and it would be good to know how your rules would have worked if your model had initiated longs on ENE or BSC that eventually went bust, or other names that were taken over or merged.

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When to increase position size

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Most system traders do not just increase their bet size on a whim.

Many have their risk systematized to be a fixed percentage of their overall equity conjugated with the volatility of the instrument.

They increase their risk systematically and only trade larger when their capital base grows due to gains or from adding capital to their account.

Chart readers can do the same thing although they have to do it by hand.

Be careful if you increase your size because you think “you are on to something…” and get too big too soon.

That can come from hubris which we spoke about recently in another episode.

You can look at your winning percentage and ratio of win size to loss size to help determine if/when you should increase your bet size / risk unit.

Plan to increase and decrease your bet size before you have to so you can think more clearly while planning.

Click here to get your free copy of The Inner Voice of Trading audiobook.

How your stop orders reflect your belief system and why knowing isn’t doing

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If someone you know is bearish and they’re not short, they’re full of it and probably like to hear themselves talk.

Do them a favor and call them on their nonsense.

Ask them where their stop orders to enter the market are.

I find this happens with people who are looking for attention and trying to show you how smart they are.

What a snooze.

I don’t care about opinions and theories.

If this might be something you’re falling victim to, you can gauge your own level of self-deception by listing all the entries you have for your theories.

Click here to get your free copy of The Inner Voice of Trading audiobook.