Another potential strategy?

So I'm reading reminiscences of a stock operator (thanks aiki for recommend it). And last night Livingston was talking about another speculator who would always have a stop loss on all of his investments at the smallest fraction of a movement downward, so every time a stock would go down he would get rid of it right away. This seems like a pretty good idea to me as long as you had a small enough position that you could get rid of it before losing a lot more money. So I was thinking what if you only bought stocks the moment they begin to go up, and always sell the moment they head down. You could also short them when they go down if you want to. Maybe this would work because most movements obviously are greater in magnitude than the very small movement that you would know to sell or buy on, so you would be able to ride the rest of the movement and then sell when it began to head down again or vis versa. It would be a day trading strategy obviously. I don't know a lot about day trading so I have no idea if it would work or not, it was just an idea. If you had a big enough stake that you could earn more than the expense of commissions which would be a lot, then it seems like it would be a pretty surefire way to make money. It wouldn't work if you were trading too much stock though. Why or why not would this work? Thanks.

Great Book! Must read for all market participants.

I don't see a problem with that strategy.

I think you need to develop a clear and simple risk parameters for you personally. You can set a certain % - that's fine. You can set your risk based on support and resistance and then tailor your exposure via how much you trade. Either way is acceptable. You just need to find out what you like or makes sense to you.

Sounds so simple. The problem lies in psychology and money management for most people. Get over (or control) that hurdle and you can further refine from there.

Say your acceptable stop (the price you expect the signal to have failed) is $.15 from your buy signal. Calculate the acceptable loss in dollars of that amount....for example..your trading base allow 2% risk on each trade and you are trading from a $50,000 base. You have $1000 to risk. You can trade 6666 shares....or 6600 for easier execution.

6600 is now the share amount you execute.

If you are trading a decent system with positive expectancy and at least a 2:1 reward to risk, your target must be achieveable for $.30. Or $1980 profit. Consider commissions and sec fees of course.

The problem for the undisciplined comes when the stock dips $.20, you sell, and then watch it rebound to your target.

You have now imprinted a very powerful memory in your mind.