Stepping in Front of Size

Premise:

fairly thin NYSE and ASE stocks, jump in front of someone impatient and taking out a lot of size. Large buyers have trouble accumulating these stocks and when they buy they put the price against themselves. This strategy might not work before for shorts b/c of the uptick rule but that's been eliminated now.

For Buys

1. A stock must have an ADX reading of above 30 and its + DI greater than its -DI, or the stock must have an RS reading of 95 or higher.
2. The average daily volume for the stock should be under 200,000 shares a day. The lower the volume, the more money you will make with this strategy.
3. The stock must be trading higher for the day. This strategy doesn't work for stocks down on the day.
4. Most importantly, the buyer must show me he is impatient or I must see there is more than one institution trading this strategy. How do I know this? Because I am waiting for two consecutive higher bid prices where there is size to buy. ("Size" means 5,000 shares or more). For example, I want to see a market that has 5,000 shares bid at 52 and 1,000 offered at 52 1/4. I then want to see the big go to 52 1/8 or 52 1/4 with 5,000 shares to buy again. This means someone is desperately looking for stock.
5. In the previous example, if the market goes to 52 1/8 bid (with 5,000 to buy) and 52 3/8 offer, I will pay the offer side. The only time I will ignore this higher bid is if I see 5,000 shares or more offered there. This means there may be a seller who can accommodate the large buyer.
6. My protective stop is 1/8 point under the price of the original 5,000 share bid (52).
7. Where I take profits is very subjective. Many times, if there is size on the offer side or if I see my new friend has been filled on his order, I will automatically take my profits.

1-2-3-4's

Premise:

Strocks trending strongly tend to rest for three days to catch their breath before resuming their move to new levels.. This setup does not occur very often and they do not always rest three days. Sometimes a day or two and others four or five.

For Buys

1. Identify a market whose 14-day ADX is greater than 30. The higher the ADX, the better. If you are not using ADX, the RS reading must be at 95 or higher.
2. The 14-day + DI reading must be greater than the 14-day -DI reading.
3. Waiting for the market to have a 1-2-3 correction. This means that the market must have three consecutive lower lows or any combination of two lower lows and an inside day.
4. On day four only, buy 1/8 above the day-three high.
5. When filled, your initial protective stop should be near the day-three low.
6. As the position moves in your favor, you should trail your stops. In this setup, I tend to allow for a little more breathing room on my stops because of the upside potential of the moves.

For Shorts

1. ADX must be greater than 30. The higher the ADX, the better.
2. The -DI must be greater than the + DI.
3. Wait for a 1-2-3 rally. Three higher highs or any combination or two higher highs and an inside day.
4. On day four only, sell short 1/8 below the day-three low.
5. Your initial protective stop should be near the day-three high.
6. As the position moves in your favor, trail your stops.

Expansion Breakouts

Premise:

Daily range is the largest of the previous nine trading sessions, the good ones tended to have very small pullbacks so the stops should be kept tight.

For Buys:

1. Today (day one) must be a two-month calendar high. (This strategy does not use ADX, nor RS. I simply want a new high accompanied by a range expansion)
2. Today's rnage (high minus low) must be equal to or larger than the largest daily range of the previous nine trading days.
3. Tomorrow only, buy 1/8 point above today's high
4. Initial maximum risk (stop) is 1 point under yesterday's close.

For Shorts:

1. Today (day one) must be a two-month calendar low.
2. Today's range must be equal to or larger than the largest daily range of the previous nine trading days.
3. Tomorrow only, sell short 1/8 point under today's low.
4. Our initial protective stop is 1 point above yesterday's close.

How this could work intraday:

Yahtzee in Sight

Trading has been good recently. I'm feeling much confident about the set ups that I look for. I have been bad about churning lately though. The last time I had a bad day it was the same thing, I just kept throwing money at NYX and some other stock that I traded multiple times. Yesterday I could've made another personal daily high for about $350 and I lost bunch of money on RIG and GSF. I ended the day down about $100... son of a bitch. I should have some kind of personal policy like two strike and I'm out and never touch that stock for the rest of the day.... boy, that was just stupid.

If I did end up $350 on Monday that would've put me about 3 or 400 dollars away from yahtzeeing, which really is quite exciting. I'm up for November right now, which is one of my goals. Let's trade smart and maybe on some of the trades I'll take 400 shares. If all goes very well, I just might yahtzee by the end of this month.

I've been reading this book called Hit and Run by Jeff Cooper, which is more of a technical book and I thoroughly enjoyed it. It was a quick read since there's bunch of charts in there. I wonder if this was really worth $100 like it's going for on Amazon. I'm going to write them down and think more about them later b/c I'm not exactly sure how it'll translate to the timeline we're trading but I get a hunch that it'll work pretty well since some of the chart pattern does seem kind of familiar.

NO BLOW UPS!!

Had a good day today. Set a new personal daily high of about $290, $300 depending on how my commissions come out. It's hard to gauge with so many shares that I traded... about 16,000 shares. I was up about $178 yesterday, really, not too shabby for two days of work. Maybe I'll get on that list for top rookies of the week. In order to do that I need to prevent a blow up tomorrow. Every time I have a good winning streak I seem to follow up with a bad losing day and it gets difficult shake that stink. That's what happened last Wednesday, fortunately I was able to get two small up days on Thursday and Friday to end the week in positive territory to be able to trade 400 shares this week.

I feel more comfortable about taking 200 shares to get in a position trade now. The set ups I look for work most of the time. I think I can time it a lot better and get more profit out of the trades. Looking back at some of my trades, it's nice that I have some good winners but I think I've been letting some of my losers get out of hand.

Had a little chat with Chris last week and he showed me this rank report that shows the most active stocks by volume and it'll show how high or low it is relatively to today's range. It's a pretty handy tool to look for reversals, bounces or if the price breaks through the previous level you could follow the trend. I want to take some time and talk to David and Anthony. It'd probably be easier since they took part in my interview.

My Fingers Are Not Listening to My Brain

I'm still trading a lot. In fact, I traded even more than I did on Monday. 12200 shares. Yeesh! That's 3 or 4 times more than what I usually trade. I said at one more in mid morning: "my fingers are not listening to my brain. I can't stop pulling triggers."

I need to practice some discipline and on the really good set ups I'll take 200 shares.

Got into CHL yesterday in my personal account. After an hour of trading I was convinced of the stock and China and the bull market, for now. I sold my DEO for a loss... such pain. Not only it ticks back up but the stock needs to go through settlement for three days so I can't use it for trading. D'oh! I'm still don't fully believed in this rally. If the sellers come back in I might get out...

Gaining Momentum

So I had a good week last week, up about $125 and Monday was another good day, up about $150. I've been trading a lot more shares than usual and I think it's because I've been having good days and I felt a little bit more confidently, maybe overly so, and sometimes just start pulling triggers without really thinking about it. I've definitely chased a few stocks. I got some really good winner that are .50+ and I've also had a few bad losers. I think I'm going to try to fine tune my trading styles and the set ups that I'm looking for and once I do I'll take 200 on the trades instead of 100.

And I want to start talking to different traders and bounce some ideas around. I'm going to talk to Chris, he's the top rookie in the company right now and then maybe David and Anthony since they interviewed me and also Nish.

Breaking the Mental Gap

I seem to have this mental cap on myself. Hopefully I broke it today. I started off the day w/ one for $74 and later on I got one that was $175. I did have a few losses on some of the position trades. There was a part from the Market Wizards book that I remember the trader being interviewed said that people get what they want out of this job. I guess that's my problem up to now. I didn't expect to win big and that's why I'm grinding myself out at like 60 some dollars.

I'm shooting for a profitable Novemeber. Forget trying to trade 400... that stuff will fall in place. I can't let this good day get to my head. I still need to trade w/ discipline, look for my good set up and not chase things. Stop thinking about the money and just make the good trades.

Market Wizards: Final Word

Common demoninators

All those interviewed had a driving desire to become successful traders---in many cases, overcoming significant obstacles to reach their goal.

All reflected confidence that they could continue to win over the long run. Almost invariably, they considered their own trading as the best and safest investment for their money.

Each trader had found a methodology that worked for him and remained true to that approach. is is significant that discipline was the word most frequently mentioned.

the top traders take their trading very seriously; most devote a substantial amount of their waking hours to market analysis and trading strategy.

Rigid risk control is one of the key elements in the trading strategy of virtually all those interviewed.

In a variety of ways, many of the traders stressed the importance of having the patience to wait for the right trading opportunity to present itself.

The importance of acting independent of the crowd was a frequently emphasized point.

All the top traders understand that losing is part of the game.

They all love what they are doing.

Market Wizards: Mark Weinstein

Always do your homework.

Don't be arrogant. When you get arrogant, you forsake risk control. The best traders are the most humble.

Understand your limitations. Everyone has limitations---even the best traders

Be your own person. Think against the herd, as they must lose in time.

Don't trade until an opportunity presents itself. Knowing when to stay out of the markets is as important as knowing when to be in them.

Your strategy has to be flexible enough to change when the environment changes. The mistake most people make is they keep the same strategy all the time. They say, "damn, the market didn't behave the way I thought it would." Why should it? Life and the markets just don't work that way.

Don't get too complacent once yyou have made profits. The toughest thing in the world is holding on to profits. That is because once you have attained a goal, you then set a second goal that is usually the same as the first one: to make more money. Consequently, for many people, attainment of that second goal is not as rewarding. They may begin to question what they really want from trading and trigger a self-destruct process in which they wind up losing.

You have to learn how to lose; it is more important thant learning how to win. If you think you are always going to be a winner, when you lose, you will develop feelings of hostility and end up blaming the market instead of trying to learn why you lost.