When I started my career in this great business in the early seventies, I worked under a guy named Gary who acted as a mentor to me.
Now Gary was definitely a character and his trading style was something else altogether.
Every time he made a trade he would flip an egg timer over and the sand would start running.
Now you have to remember, I was green to trading back then and had never seen someone with Gary's unique approach and trading style. I just thought that having an egg timer on your desk and flipping it over every time you made a trade was a normal part of trading.
Have you figured out why Gary was using a egg timer?
Was it because ...
(A) He liked playing with egg timers
(B) He liked to time his poached eggs
(C) He used it for money management
If you chose (C) you are correct. Gary did use an egg timer for money management. It's not as crazy as you might think and it suited Gary's own style of trading perfectly.
You see Gary was using a TIME STOP.
How it worked is like this, Gary would see something on his intra-day charts that was a buy, and then buy it immediately. If it did not go up by the time the sand had finished running through his egg timer he would exit the market win, lose or draw. It was just that simple.
I never had the type of trading personality to trade like Gary, but I have to admit the egg timer worked.
You may want to give it a try only substitute the egg timer and use days or weeks as your time frame.
P.S. If you missed any of the "Traders Whiteboard" series watch them here.
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6 thoughts on “Can an egg timer improve your trading?”
Thank you for the clarification.
I tried it and learned much:
1. If used to get out of the trade after 3 minutes the losses can be less than with a stop.
2. It takes guts.
3. Later when reviewing the method against the stock's daily minute chart, I realized I was trading based on price, not trend. Gack!
This isnot clear ! Do you mean : when at the end of the timer sand run, he considered ... win vs loss/breakeven? If he had a win.. . did he flip the timer over and continue another ccycle etc. until he was either a looser or in a draw (breakeven) with his last cycle, And if the initial trade was a looser or breakeven he meerly closde it out & waited for his next trade signal? Thanks,IN HIM, Phil Mitchell
How amusing. I actually have an egg timer from an old game, by my desk. For holiday fun I'll try it for a day (on paper.)
But, I am a little confused. The article says that '"If it did not go up by the time the sand had finished running through his egg timer he would exit the market win, lose or draw."
My question is this...if the market did not go up, how could he exit the market with a win?
That's a good observation. The reality is Gary would exit positions based on his time element. Gary was very serious in using time stops because if they negate his technical analysis he would basically be out of a market very quickly allowing him to cut his losses to an absolute minimum. This allowed his profits to run while cutting losses to a minimum. This is the classic way of making money in the market.
Enjoy the holidays.
I suppose it comes down to discipline. Whether you use time based or dollar amount stop loss, you need the discipline to get out of the trade if the trade is not going in the anticipated direction.
My son and I have $1,500 in a Roth account and I want to make $50 at least three times a week.
Is this possible with the small amount of money that we have and the return we are expecting?
Also, since we are totally new to trading where can we get started with trading information?
The first thing I would say is that you need to develop a plan and then quiz yourself. Do you have enough money to properly diversify your holdings? How much do you have to recover to pay off your brokers commissions? How will you determine stop loss placements?
You are looking to make 40% return in a month and I am assuming the $150 / week would be over your commission. I guess anything is possible, but the return is a lot to make in a short period of time with the capital you have. I am not a licensed broker, so I can not offer any specific advice... but I would say that you need to think hard about your goals and then set a plan to achieve. Take into consideration profit targets, stop loss placements, diversifying your portfolio, your own preference on volume, price, etc. You may want to consider consulting a professional as well. Remember that you should only trade with money you can afford to lose.
There are a lot of places you can educate yourself. Personally, I think that for newbie traders the web is the perfect playground to grow and learn. Also, starting a paper trading account is one of the most hands on ways you can learn (procedures, trading rules, risk management, asset allocation). I would start with that and once you determine your trading goals and type, then you can move onto more detailed trading education like INO TV. If you want to see some of the more experienced trading education included four free seminars then check out our free version at INO TV FREE.
Good luck and best wishes,
Director of New Business Development
INO.com & MarketClub
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