How To Make The Most Of A Automated Trade Idea

Most people who are in the market spend about 80% of their time trying to find an idea, rather than actually figuring out how to implement a automated trade idea. While selection is key, going in at the wrong time, or before an expected news event that may trigger additional volatility is asking for trouble. Even if you are not a super active trader, the timing aspect is often overlooked. Now if you are a long term investor, it becomes less of an issue – however I know very few people, even if they plan on holding the investment for years, that would like to see it sell 3-5%% down after purchase. After all, in hindsight, had you waited a bit you could have gotten it on sale – but some of this part is unavoidable. We will concentrate on what is avoidable to help with timing.

Anytime you are looking to invest, whether long term or a automated trade idea, the timing of WHEN to go in is important. Some stocks on an average day can have a 5 or 7% range between the highest price and the lowest price, if they are volatile. So some attention needs to be paid about when to actually go in. Where you think it might eventually go should not really affect you here. Too many people say ‘Well the stock is 40 here today, but in 2 days I think it will be 45 dollars so I don’t care how I enter my automated trade idea.’ or ‘I think it will be 25 points higher in a year or 2, so who cares?’ Well if you think about it, if you regularly give the market even 1% per trade, think about how much that adds up to over the years. After all, would you pay a broker 1% or 2% commission per trade? Years ago maybe, these days that is almost unheard of anywhere.

So what is needed is a basic frame of reference to try to time the entry. Usually the best method is splitting the order so as to not entirely miss it (it does happen occasionally if one is perfect :) ). To do a decent job of entry, you need to look at where the stock has been in the last 1 or 2 hours, and where it is versus the last 2 hours of the prior day. If it is at the high range, the only justification for entering would be a high expectation that it would continue and you would miss it. Often this is hard to judge, so this is where splitting the order can come in handy. Enter half now, and then put more in 1 or 2% lower (this is assuming you are not in a automated stock pick, which is entirely different). This way if you are right, and the stock does sell off, you now own the stock at a net better price. If the price takes off, you have not entirely missed it. One thing with this method is you will sometimes miss adding as many shares as you wanted. Usually chasing it and adding higher is NOT a good idea.

Now if the stock is in the lower 1/3 of the range for the last 1-2 hours and its near the low of the prior day its probably ok to add the full position if its a somewhat longer term trade. The only exception to this would be the last 45 minutes. Usually its not advisable to add stocks breaking or near the lows in the last 45 minutes as they have a tendency to go lower the next am. Of course this depends on the issue looked at and market conditions, but in general this holds.

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This entry was posted on Thursday, May 15th, 2008 and is filed under Finance. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

10 Responses to “How To Make The Most Of A Automated Trade Idea”

  1. sugar paildenkow on July 31st, 2010 at 4:35 pm

    RT Great explanation of the financial problems around the globe #addtoany #banksters #economics

  2. burkowski mayob on August 4th, 2010 at 8:42 am

    It became a news event because it basically denied the rights to an entire group of people.

  3. gio blaes on August 9th, 2010 at 12:12 am

    “Perhaps you weren’t in Los Angeles during the aftermath of Proposition 8, but I can tell you, the Prop. 8 supporters have good reason to fear gay rights activists, just ask the many many Black people, both gay and heterosexual, who found themselves in the wrong place at the wrong time after Proposition 8 passed. They were accosted in their cars, on the street, called Niggers, and blamed for the passage of Prop. 8 simply because of their skin color.”

  4. han on August 10th, 2010 at 9:54 am

    Oh please, the stock market decline has nothing to do with Obama's inauguration. If you do not like him, fine, don't make up BS to support your prejudice against him.

    To the guy above me, 9-11 happened under Bush's watch. You are a sick individual to hope for more terrorist attacks on your fellow countrymen just because you want to see the Obama administration discredited.

  5. lucregregl cuschi on August 15th, 2010 at 8:01 pm

    trick question… there is no defined answer to "decent job" and "decent wage". it is very subjective. what i may think is decent may be way different that what you view as decent. to me, $40,000/year is decent. to my dad, decent is $90,000. it all is variant upon interpretation. what do you want to do and what do you want to get out of it versus what do they want to do and what do they want to get out of it.

    i'm sure this isn't exactly what you were looking for, but i hope it helps.

  6. aridge on September 19th, 2010 at 3:11 am

    There are a vast number of movies, feature length and shorts, that never made it to the theaters, came out at the wrong time, were unfairly panned by critics, or just were unlucky. They could have a real life if whoever owns their copyright, released them on a limited basis for home viewing only, via Torrent and Magnet. Likely, if there was something good enough about them, then whoever owned the copyright could retail high quality DVDs by mail order. And maybe, by agreement, the Torrent site operators would agree to only host the avi version, not the DVD version. [...]

  7. vela ney on September 30th, 2010 at 10:32 am

    Hey Debbie, if playing the stock market is a “risky gamble” then I assume you don't have any money invested in the stock market?? what? a liar.

  8. juernelu vers on September 30th, 2010 at 11:33 pm

    Violet said: How could they have been in the wrong place at the wrong time when THEY WERE AT SCHOOL….so being at school to better themselves and become a productive citizen in Bush’s society was the WRONG place?
    I hate Bush as much as the next gal, but really he was emphasizing what you're saying. In the wrong place at the wrong time is used to describe something senseless and unpredictable without any understandable cause, i.e. “We may never know – they were just in the wrong place at the wrong time.”

    / Idiosyncratic Exploration

  9. black rabbit on April 18th, 2011 at 3:35 pm

    As per Einstein Special relativity theory there is no absolute frame of Reference in the Universe.
    As every volume structure of mass is in continual motion Hence there is no frame of reference at rest in the visible Universe.

    The Lorentz transformation equations were Used by Einstein to prove His theory of relativity concerning measurements of mass, time ,and travel distance of mass structures.

    In reality the faster one travels, both the travel time and the distance toward the destination is shortened, as compared to the motion of a turtle. At the speed of a turtle travel time is very [...]

  10. kujustin on April 20th, 2011 at 5:35 am

    Simple economics, the fact that the investment is brainless means it’s also not going to earn him nearly the return that something requiring a brain would. OP don’t assume you can only be a passive investor. It’s a tragedy that this is what we tell our children “investing” means. My money earns me 50+%/yr because I put in a modest amount of effort to invest it in my own projects instead of investing in someone else’s (aka the stock market). If you want to fund giant faceless corporations and earn 4-8%/yr for doing it then the S&P is your spot. [...]