When Do You Hold A Day Trade Overnight? Try These Rules…

  • August 25, 2003
  • Rob Hanna


Last

Wednesday’s column got a few interesting
responses and
questions from some of you. In light of that, I thought I would lay out my exact
rules for when I would consider holding a daytrade entry overnight or
longer. For people that concentrate on short-term trading, it may be rare that
all three of these criteria are met, but when they are that is when I would
consider a longer-term hold.

  1. The
    stock must finish the day strongly:     To consider holding a daytrade as a
    longer-term position, I would normally like to see it finish in the top 10% of
    its daily range. Top 25% would be an absolute requirement. Many times,
    late-afternoon strength will follow through to the following morning.  This is
    what you’d be anticipating here.

     

  2. Profits
    must already be locked in on a majority of the position:     If a trade
    started out as a daytrade, then that is how most of it should be treated. 
    Holding a position overnight introduces additional risk. Having profits
    already in your pocket will help to offset this additional risk.

     


  3. Positive outlook on the daily or weekly chart and good fundamentals    :
    This was the main point of last week’s column. Unless you feel a stock is
    likely to continue its move in the coming days and week, there is no reason to
    continue to hold that stock. For example, the stocks I talked about

    last week     had both broken out of intermediate-term basing formations.

Swinging for home runs is fine,
and home run trades can really give a nice boost to your portfolio. It’s
important to be selective, though. You should only swing for the fences when the
situation calls for it. Otherwise, you may be taking on undue risk in your
portfolio.

Volume was so light today that I thought something was wrong with my data until
I double-checked it. The indices finished basically flat. In other words,
nothing significant happened. From my point of view, the story remains the same
as it has for the last several weeks. We are still in a trading range. Be
patient and be ready for a move in either direction. As I normally like to do at
month-end, I will give a more detailed overview of my market outlook on
Wednesday.

Good trading,

Rob Hanna


robhanna@rcn.com